The collection of Income Tax is the responsibility of the Revenue Commissioners, who operate under the authority of the Minister for Finance. Teachers’ income tax is assessed under the Pay As You Earn (PAYE) system. The amount of tax deducted is based on the ‘taxable income’ of an individual in the year of assessment.
The tax year commences on 1 January each year and runs until the 31 December.
Income tax is not deducted from total gross earnings. Contributions to the Superannuation Scheme are automatically deducted before PAYE is applied. (Tax relief is also allowed on AVCs subject to certain revenue limits). Tax Saver Commuter Tickets, where relevant, are also deducted at source. All teachers registered with the Teaching Council can claim a tax credit of €65 for the annual registration fee for the 2014 tax year.
At the end of each tax year your employer must give you a certificate of pay and of the tax and PRSI deducted by him or her during the year. This certificate is called a form P60 and comes in two parts. It is your record of:
- the pay you received from your employer
- the tax deducted under PAYE and
- the PRSI contributions deducted.
If your liability to tax for any year needs to be reviewed, you will need to send one part of the form P60 to your district office. You would send a second part to the Social & Family Affairs Office as evidence that you have paid PRSI contributions, if you need to claim a benefit.
Form P45 shows:
- Gross pay to date of leaving
- Tax deducted to date of leaving
- PRSI deducted to date of leaving and number of insurable weeks
- The tax credits, standard rate cut-off point and tax table in operation.
Form P45 is a very important document and is needed for:
- Refund of tax during unemployment
- Claiming Social Welfare benefits
- To give to your new employer in order to avoid emergency tax
Rates of Income Tax
The rates of tax deducted on ‘taxable income’ may vary from year to year and are generally adjusted in the Budget. There are currently two tax bands, referred to as the standard rate (20%) and the higher or marginal rate (41%).