If you worked in any of these countries, you could be due a Tax Refund

What you need to know about your P60 - the complete Taxback.com guide

What's your P60 all about?

Every employee is entitled to receive a P60 from his employer if he/she was employed on the last day of the year i.e. 31 December.

If you leave employment during a tax year, you will receive a P45 when leaving instead.

All employees should receive their P60 by the 15 February, however, many employers will issue P60s prior to this.

 

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Not an assessment

It is important for all employees to understand that the P60 is not a Revenue assessment of your position and is not an indication of your final tax liability for the year. The P60 merely provides a summary of the tax, PRSI and USC deducted by your employer in the tax year. Every employer is obliged to deduct tax based on the tax credit certificate issued to them by Revenue regardless of any other information they may have.

The tax credit certificate issued by Revenue is based on the information they hold in relation to you i.e. they may not be aware that you are entitled to certain additional credits if they have not been informed of this. Some important terms

 

 

1. Tax Credits

These are used to reduce your income tax liability. The amount of credits available to you depends on your personal circumstances as you will see below. Not all tax credits will be factored into payroll and in some cases additional tax credits may be claimed after the year end resulting in a refund. Tax credits represent euro for euro the actual money in your pocket i.e. a tax credit of €100 means a tax saving of €100 meaning €100 more in your pocket.

 

 

2. Tax Bands

There are currently 2 rates of tax in Ireland, the standard rate of 20% and the higher rate of 41%. The first portion of your income is taxed at the standard rate and once you have earned a certain amount everything after that is taxed at 41%. Your tax band confirms that amount you can earn before being taxed at 41%. The band is allocated on an annual basis but it is divided out into weeks or months to help spread your tax evenly.

 

 

3. PRSI class

This is determined by factors such as your level of earnings, whether you are an employee or self employed and whether you are a private or public sector worker. Your PRSI class will determine the rate at which you pay PRSI and the amount of income you can earn without incurring the charge.

 

 

4. PPS Number

This is your unique identification number for all dealings with the Public Service (i.e. Revenue, Department of social protection, health and education services).

 

 

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P60 Analysis:

The best way to fully explain the P60 is to provide some examples with explanations. We have therefore marked up 4 sample P60s highlighting various issues.

Each P60 may be divided into various sections as follows:

 


1. Top portion

This part of the P60 contains your personal details i.e. your name, address, PPS number, tax credit and rate band information. Again. It is important to remember that the tax credit and band here is merely a summary of what has been applied via the payroll. Also, it is important to look into this top section of the P60 to confirm which year the P60 relates to. This information is found at the very top of the P60.

 

 

2. Section A

This part of the P60 confirms your gross taxable pay for the year. The figure here will be after the deduction of any pension contributions you will have made via the payroll. This may explain any difference when you compare this figure to the gross pay per your contract. If you changed employment during the year your pay details in this section will be subdivided into the salary paid to you by your previous employer (s) and that paid to you by your current employer.

 

 

3. Section B

This part of the P60 confirms the total tax deducted in the year. Again, if you changed employment during the year the tax paid details will be subdivided into that paid in your previous employment (s) and that paid in your current employment. Thus giving a total summary for the year.

 

 

4. Section C

This part of the P60 provides details of the PRSI paid in your current employment. This section is different to the last 2 sections in that PRSI paid in previous employments is not recorded here. The first item in this section is the employee PRSI for the year i.e. the PRSI that was actually deducted from your salary. Prior to 2011 this amount would also have included health levy and this made the calculation a little more complicated but now that the health levy has been abolished this part of the P60 is a lot easier to understand. The second item in this section is total PRSI i.e. employer and employee PRSI. If you deduct the figure from the first item from this total figure you will have the total PRSI paid on your behalf by your employer in the year. Section C also contains details regarding your PRSI class etc.

 

 

5. Section D

This is a new section and confirms the amount of pay subject to USC in the year. This figure may not be the same as the amount of pay subject to tax as it will be prior to the deduction of pension contributions. In addition, this section is somewhat similar to the PRSI section of the P60 as it contains details for this employment only. Finally, this section confirms the amount of USC deducted from you in this employment.

 

 

6. The bottom section!

The bottom of the P60 will show details of your employer’s name, registration number and address.

 

 

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P60 Examples:

A – Jane Doe Jane is married and her husband stays at home to take care of their two sons. He does not work outside the home.
Jane is a company director with a 70% shareholding in the company:

 

 

1. Name

It is always important to check that this is correct!

 

2. Address

This will be her address per the company records. If this is not the address that you wish correspondence to be sent to it is advisable to tell your employer and they will update their records.

 

3. PPS Number

Again, always good to check if this number is correct.

 

 

4. Tax Credit

This is the interesting part! In Jane’s case she has been allocated a tax credit of €3,300. By checking her Revenue account online we were able to determine that this is the married person’s personal tax credit. Jane is not entitled to the PAYE credit of €1,650 as she is a proprietory director. However, we have noted that she was not allocated the home carer tax credit of €810 to which she is entitled. Jane will be able to make a claim for this credit now that the tax year is over and seek a refund of €810.

 

 

5. Rate Band

Jane has been allocated the tax rate band appropriate to her circumstances i.e. €41,800 for a married couple with one income (you will note a very slight rounding issue due to the payroll software). This means that any income she earns up to €41,800 is taxed at 20% and any income over that amount is taxed at 41%.

 

 

6. Total pay

€60,000.

 

 

7. Pay in respect of previous employment (s)

As she only had this employment for the year this field is nil.

 

 

8. Pay in respect of this employment

As she only had this employment for the year this field is the same as 6 above.

 

 

9. Employee’s PRSI

As Jane is a company director, she is class S1 (see below). This means that she pays PRSI on her entire pay at a rate of 4%. As you will see from the other examples, this is different to the method of calculation of PRSI for an employee whereby they are entitled to a PRSI free amount each month. Jane’s PRSI is, therefore, €60,000 X 4% = €2,400.

 

 

10. Total (employer + employee) PRSI

As Jane is insured under class S no employer PRSI is due. Therefore, the total PRSI is the PRSI which she has paid during the year.

 

 

11. Jane’s PRSI class is S1 as she is a proprietary director

 

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12. Total Tax

This is the total tax that Jane has paid during the year. If Jane has income other than that detailed on this P60 (eg. Rental income) she will need to report this on her tax return and it is likely that she will have to pay additional tax i.e. this figure is merely confirmation of the tax paid over to date.

 

 

13. Tax  in respect of previous employment (s)

As she only had this employment for the year this field is nil.

 

 

14. Tax in respect of this employment

As she only had this employment for the year this field is the same as 12 above.

 

 

15. Gross pay for universal charge

In this case this figure is the same as 6 above as she did not make any pension contributions in the year. If she had made pension contributions we would expect this figure to be higher than that at number six. Also, if she had changed job during the year we would expect this figure to be lower than number 6 above as it only reflects pay for this employment.

 

 

16. USC deducted

This has been calculated as follows: (€10,036 X 2%) + (€5,890 X 4%) + (€43,984 X 7%) = €3,518.52.

 

 

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B - Michael Murphy

Michael is married and both himself and his wife work outside of the home. His wife works part time and has therefore allocated some of her bands and credits to Michael. However, as his hours were reduced during the year he has not utilised these in full and it would be advisable for his wife to now check her P60 to determine whether or not she paid any tax during the year. If she did pay any tax it is likely that she will be due a refund:

 

 

1. Tax Credit

This time we have skipped to the interesting part! In Micheal’s case he has been allocated a tax credit of €4,950. By checking his Revenue account online we were able to determine that this is the married person’s personal tax credit of €3,300 plus the PAYE tax credit of €1,650. Michael’s wife, therefore, should expect to see a tax credit of €1,650 i.e. just a PAYE credit as Michael has utilised her personal tax credit.

 

 

2. Rate Band

Michael and his wife are entitled to a rate band of €41,800 plus an amount up to €23,800 or his wife’s income whichever is the lower. Michael and his wife chose to have this band allocated in full to Michael. This resulted in him being allocated with a rate band of €44,000. This means that he can earn up to €44,000 before incurring a tax charge at the higher rate.

 

 

3. Employee’s PRSI

As an employee, Michael is entitled to a PRSI exempt amount of €551 per month. Everything he earns over that amount is subject to PRSI at 4%. His PRSI is therefore calculated as follows: (€18,408 – (€551 X 12)) X 4% = €471.84.

 

 

4. Total PRSI

As Michael is insured under class AX, employer’s PRSI was payable at a rate of 8.5% up to June 2011 and a rate of 4.25% for the second half of the year. The total PRSI figure therefore is calculated by dividing his income of €18,408 by 2 and multiplying one half by 8.5% and the other half by 4.25%. These two amounts are added to the employee PRSI amount to reach a total figure of €1,645.35.

 

 

5. PRSI class

Class AX applies as he earns more than €353 but less than €356 per week.

 

 

6. Total net tax deducted

As Michael’s earnings were less than his rate band his income was taxed in full at 20% i.e. €18,408 X 20% = €3,682. After this the tax credits of €4,950 were deducted. As the tax credits were greater than the tax he paid no tax during the year. Note – you may hear of tax credits being referred to as “non refundable tax credits”. This means that if your tax before the deduction of credits is less than the credits your tax will be reduced to nil rather than a negative figure. If he earned no other income and his wife’s earnings were too low for her to have incurred a tax charge via the payroll this will be his final position for the year.

 

 

7. USC deducted

This has been calculated as follows: (€10,036 X 2%) + (€5,890 X 4%) + (€2,392 X 7%) = €607.08.

 

 

C - Mary White

Mary is unmarried. In addition to her employment income, she earns €10,000 each year from another source. PAYE is not applied to this €10,000 and therefore Mary has asked the Revenue to make adjustments to her tax credits and rate band in order to ensure that the tax on this income is collected throughout the year and to avoid a tax liability at the year end. Mary needs to check her records each year to ensure that the correct adjustments have been made:

 

 

1. Tax Credit

Mary has been allocated the single tax credit of €1,650 plus the PAYE tax credit of €1,650. Giving a total tax credit of €3,300. This has, however, been reduced by her non PAYE income multiplied by the standard rate of tax i.e. 20%. Therefore, her total credits of €3,300 have been reduced by €2,000, leaving her with annual tax credits of €1,300.

 

 

2. Rate Band

Mary has been allocated with a single person’s tax rate band of €32,800. This, has, however, been reduced by the amount of her non PAYE income i.e. €10,000 leaving her with a rate band of €22,800 for the year. If Mary’s non PAYE income in 2011 was less than €10,000 she will be entitled to a refund of tax but if this income was greater than €10,000 in 2011 she will need to make an additional tax payment.

 

 

3. Employee’s PRSI

As an employee, Mary is entitled to a PRSI exempt amount of €551 per month. Everything she earns over that amount is subject to PRSI at 4%. Her PRSI is therefore calculated as follows: (€72,000  – (€551 X 12)) X 4% = €2,615.52.

 

 

4. Total PRSI

As Mary is insured under class A1, employer’s PRSI was payable at a rate of 10.75%. The total PRSI figure therefore is calculated by multiplying her income by 10.75% and adding this to the employee PRSI amount to reach a total figure of €10,335.52.

 

 

5. PRSI class

Class A1 applies as she is an employee earning over €500 per week.

 

 

6. Total net tax deducted

This is calculated by firstly multiplying the rate band by 20% (i.e. €22,800 X 20% = €4,560). We then deduct the rate band from the total income of €72,000, which gives us €49,200. This amount is then multiplied by the higher rate of tax (€49,200 X 41% = €20,172). The two amounts are added and the tax credit is deducted from the total i.e. €4,560 + €20,172 - €1,300 = €23,432.

 

 

D – Joe Bloggs.

 

 

Joe is single:

 

 

1. Tax Credit

Joe has been allocated the single tax credit of €1,650 plus the PAYE tax credit of €1,650. Giving a total tax credit of €3,300. However, Joe has informed us that he has been paying rent for the past number of years. In this regard he is entitled to an additional tax credit of €320. He has not received relief in respect of this during the tax year. But, now that the year is over he may make a claim for this additional credit and this will result in a refund due to him. As his total tax paid for the year is less than the tax credit to be claimed i.e. €288, he will be entitled to claim a full refund of his PAYE for the year.

 

 

2. Rate Band

Joe has been allocated with a single person’s tax rate band of €32,800 (slight rounding difference due to payroll software).

 

 

3. Employee’s PRSI

As an employee at class A0, Joe is exempt from employee PRSI.

 

 

4. Total PRSI

As Joe is insured under class A0, employer’s PRSI was payable at a rate of 8.5% up to June 2011 and a rate of 4.25% for the second half of the year. The total PRSI figure therefore is calculated by dividing his income of €17,940  by 2 and multiplying one half by 8.5% and the other half by 4.25%. These two amounts are added to the employee PRSI amount (which is nil)  to reach a total figure of €1,143.68.

 

 

5. PRSI class

Class A0 applies as he is an employee earning over €38 but less than €352 per week.

 

The average Irish tax refund is €1076.17

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About The Author

Ciara Kennedy - Digital Content Writer @ Taxback.com

Ciara is our Digital Content Writer at Taxback.com. Since graduating in Journalism and Visual media, Ciara has worked in online marketing in Ireland and Australia and loves writing in all its forms.

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