Audrey Stapleton is an employee at BAT Resources Ltd and earns a gross annual salary of €78,000. Her employer provides her with a holiday voucher worth €2,000. This is treated as a benefit-in-kind for tax purposes and is taxed accordingly. The standard rate band for a single taxpayer is €32,800. (This means that the first €32,800 is taxed at the 20% standard tax rate, and the remainder is taxed at the higher tax rate of 41%.) Audrey has the following tax credits: Single Person Tax Credit €1,650, PAYE Tax Credit €1,650 and Rent Tax Credit €320. The Universal Social Charge (USC) rates on Audrey’s gross income are 2% on the first €10,036, 4% on the next €5,980 and 7% on the balance of her gross income. Audrey pays employee PRSI at 4% of her gross income.

Leaving Cert Business Taxation: Audrey Stapleton is an employee

Audrey Stapleton is an employee at BAT Resources Ltd and earns a gross annual salary of €78,000 - Leaving Cert Business - Question A - 2013

Question A

Audrey Stapleton is an employee at BAT Resources Ltd and earns a gross annual salary of €78,000. Her employer provides her with a holiday voucher worth €2,000. This ... show full transcript

Worked Solution & Example Answer:Audrey Stapleton is an employee at BAT Resources Ltd and earns a gross annual salary of €78,000 - Leaving Cert Business - Question A - 2013

Step 1

Calculate gross income including benefit-in-kind

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Answer

Audrey's gross income is calculated by adding her gross salary and the benefit-in-kind from the holiday voucher:

Gross Salary: €78,000
Benefit-in-Kind: €2,000

Thus, the Gross Income = €78,000 + €2,000 = €80,000.

Step 2

Calculate PAYE tax payable

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Answer

The PAYE tax is determined using the tax bands:

First €32,800 taxed at 20%:
- Tax = €32,800 × 20% = €6,560.
Remaining income After €32,800:
- Remaining = €80,000 - €32,800 = €47,200.
- Tax = €47,200 × 41% = €19,352.

Total PAYE Tax = €6,560 + €19,352 = €25,912.

Step 3

Calculate net tax payable after tax credits

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To find the Net Tax Payable, subtract the total tax credits from the PAYE Tax:

Total Tax Credits = €1,650 (Single Person) + €1,650 (PAYE) + €320 (Rent) = €3,620.
Net Tax Payable = €25,912 - €3,620 = €22,292.

Step 4

Calculate employee's PRSI

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Employee's PRSI is calculated as:

PRSI = €80,000 × 4% = €3,200.

Step 5

Calculate Universal Social Charge (USC)

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Calculate USC based on brackets:

First €10,036 at 2%:
- Tax = €10,036 × 2% = €200.72.
Next €5,980 at 4%:
- Tax = €5,980 × 4% = €239.20.
Remaining income:
- Remaining = €80,000 - €10,036 - €5,980 = €64,984.
- Tax = €64,984 × 7% = €4,548.88.

Total USC = €200.72 + €239.20 + €4,548.88 = €5,988.80.

Step 6

Calculate total statutory deductions

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Total Statutory Deductions = Net Tax Payable + PRSI + USC:

= €22,292 + €3,200 + €5,988.80 = €31,480.80.

Step 7

Calculate net take-home pay

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To find the Net Income (Take-home Pay):

Net Income = Gross Income - Total Statutory Deductions: = €80,000 - €31,480.80 = €48,519.20.

To find the monthly take-home pay: Monthly Take-home Pay = €48,519.20 / 12 = €4,043.27.

Audrey Stapleton is an employee at BAT Resources Ltd and earns a gross annual salary of €78,000 - Leaving Cert Business - Question A - 2013

Worked Solution & Example Answer:Audrey Stapleton is an employee at BAT Resources Ltd and earns a gross annual salary of €78,000 - Leaving Cert Business - Question A - 2013

Calculate gross income including benefit-in-kind

Calculate PAYE tax payable

Calculate net tax payable after tax credits

Calculate employee's PRSI

Calculate Universal Social Charge (USC)

Calculate total statutory deductions

Calculate net take-home pay

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