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Household and Business Taxation

Household and Business Taxation. Chapter 12. Aims of this section. Be able to: Outline the difference between managing a household and managing a business in relation to taxation. Explain the implications of taxation to a business.

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Household and Business Taxation

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  1. Household and Business Taxation Chapter 12

  2. Aims of this section Be able to: • Outline the difference between managing a household and managing a business in relation to taxation. • Explain the implications of taxation to a business. • Identify activities common to managing a business and a household in relation to taxation, including the completion of relevant forms.

  3. Taxes paid by households • Income Tax (PAYE) • Value added tax (VAT) • Capital gains tax • Capital acquisitions tax • Deposit interest retention tax (DIRT) • Motor tax • Employee PRSI • Universal social charge (USC)

  4. Income Tax • Income tax is deducted by the employee from wages/salaries and sent to the Revenue. This is called the PAYE system. • PRSI and the USC are collected through this system.

  5. Tax Rates and Tax Bands • Standard cut-off point • This is the amount of a taxpayer’s income on which they pay tax at the standard rate. Any income earned over the standard rate is subject to the higher rate of tax. • Tax credits, which are determined by personal circumstances, reduces the amount of tax payable by the taxpayer.

  6. Tax Rates and Tax Bands

  7. Forms used in PAYE tax • Form P12A • Completed by all employees before commencing employment. • Form P60 • Issued by the employer to the employee after the end of the tax year. It shows gross pay, income tax and PRSI paid for the tax year. • Form P45 • Issued to the employee on leaving employment • Form P21 • This is known as a balancing statement. It compares tax paid with the amount that should have been paid.

  8. Income Tax Calculation From the following information, calculate the net annual take home pay of Ms Joan McCormack. Joan is an employee of Lynch Printers and earns a gross salary of €84,000. She is allowed the following tax credits. Single person tax credit of €1,650 and PAYE tax credit of €1,650. The income tax rates are 20% on the first €32,800 and 41% on the balance. Employee PRSI is €3,360, the USC is €5,880

  9. Value Added Tax (VAT) • Value added tax is paid by households when they buy goods and services. Example:

  10. Capital Gains Tax • This is tax paid by households from the sale of assets such as property or shares. • The rate in Ireland since December 2011 is 30%

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