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THE HARD-KNOCK TAX LIFE OF THE SELF-EMPLOYED

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With the General Election edging ever closer, taxation has once again come up as quite a hot topic. Everything from the abolishment of the USC to increases in taxation have been discussed ad nauseum in recent weeks. However there is one important taxation issue that is often overlooked, despite being a reality for many workers in this country. The issue at hand here is the many ways in which self-employed individuals find themselves carrying an extra weight of taxation due to their employment status than their PAYE paying counterparts.

Figures from 2014 suggested that the percentage of the Irish workforce who are self-employed makes up nearly a quarter of the overall workforce at over 17%. Thus, the financial burden of harsher taxation here is one which affects a large percentage of our working population and is an issue which demands to be raised. So, if you or your loved one is currently self-employed, just how much of a tax disadvantage does your self-employed status put you at?

One way in which the self-employed are at a disadvantage is through the percentage of tax they must pay. All employees, whether self-employed or otherwise will pay the top tax rate of 52% on all income up to €100,000. However it is when income goes above this figure that self-employed individuals will have to pay an additional amount of USC, which is not applicable to other employees.

The PAYE tax credit is another nail in the coffin for the self-employed as those in the PAYE system gain a €1,650 tax credit each year which can have a lightening effect on your tax bill, this tax credit is not applicable to self-employed workers who will instead now earn a €550 credit on earned income from 2017.

Self-employed workers may also find themselves missing out in terms of paying PRSI. Self-employed individuals must pay PRSI at 4% on any earnings over €5000 whilst PAYE employees do not pay any PRSI if they earn less than €18,304 per year. This difference in PRSI thresholds means that the self-employed person will have paid a significant amount of tax before other employees need to consider it.

If you are self-employed and concerned about perhaps having overpaid tax, we would recommend getting in touch with Revenue for a re-evaluation of your payments from the past four years. If you find yourself in need of assistance with your own or your company’s finances, please don’t hesitate to contact us here at DCA Accountants where we will be happy to help.

KEY POINTS FROM BUDGET 2016

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As the country watched with baited breath for what was promised to be a more forgiving budget than the previous efforts, there has been some questions over how much these changes may change things on a personal and professional level. We have compiled some of the key points to note from Budget 2016 for your convenience.

  • USC entry point raised to €13,000
  • USC reductions:

2015                            2016

1.5%                            1%

3.5%                            3%

7%                               5.5%

  • All USC bands lowered on earnings up to €70,044 per annum.
  • Minimum Wage to be raised from €8.65 to €9.15.
  • There will now be an additional €550 tax credit available to all owners of SME’s (Small and Medium Enterprises).
  • Normal tax bands will remain unchanged.
  • Child Benefit will increase by €5 per month, taking the total to €140 per child.
  • State Pension to increase by €3 per week for pensioners and carers aged 66years and over.
  • There is to be an increase in the Inheritance Tax Band relating to transfers from parents to children. The tax band will now stand at €280,000.
  • Social Welfare Christmas Bonus restored to 75%.
  • Cost of a packet of 20 cigarettes to increase by 50cent (including VAT).
  • Free GP care for children is to be extended to all under 12’s.
  • Fathers to be entitled to 2 weeks paid paternity leave as of September next year.

If you have any queries or concerns about how budget 2016 will affect your finances, please don’t hesitate to contact us at DCA Accountants.

BUDGET 2016 TAX CHANGES BREAKDOWN

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Now that the highly anticipated and much talked about budget for 2016 has been announced, the one thing on everyone’s minds is “how will this affect me, am I really any better off now?” In the hope of clearing some of the most important topics of interest from the budget up for you, we have compiled a breakdown of the major changes in terms of tax.

Most changes are expected to come into effect on 1st January 2016.

Income Tax:

  • No changes in income tax announced for 2016.

PRSI for Employees:

  • There were some cuts to PRSI announced for lower paid workers announced in this budget. Employees earning between €19,552 and €21,355 can now access relief of up to €624 per year. There will also be some relief for those earning between €21,355 and €22,048.

PRSI for Employers:

  • Employers should also see a reduction in the cost PRSI as it was announced that the 8.5% rate would be made available to those who earn up to €19,552 which is an increase in threshold of over €1,000

Universal Social Charge (USC):

  • All bands reduced on all earnings up to €70,044.

2015                                        2016

1.5%                                        1%

3.5%                                        3%

7%                                           5.5%

  • Entry threshold for USC increased from €12,012 to €13,000.
  • Threshold for 3% rate widened to over €18,688 which is an increase of over €1000.
  • Threshold for 5.5% rate widened.

Tax Credit for the Self-Employed:

  • An earned income tax credit of €500 was introduced for those who are self-employed, farmers, and those business owners who are not eligible for a PAYE credit (which stands at €1,650) on their income.

Tax Credit for Home Carers:

  • The tax credit for home carers is to increase from €810 to €1,000.

Tax Increases on Products:

  • The only tax increase seen on products in Budget 2016 is a 50cent increase on a packet of 20 cigarettes. There was no sign of the proposed tax on sugar.

That’s it for our rundown of the main tax changes for Budget 2016, stay tuned for more updates and advice from us following on from these Budget announcements.

If you have any queries or concerns about how budget 2016 will affect your finances, please don’t hesitate tocontact us at DCA Accountants.