Fiona is your employee. The RPN you have received for Fiona provides the following details:
To calculate weekly tax credits and rate band divide the figures provided on the RPN by 52. For fortnightly, divide each figure by 26 and for monthly, divide by 12.
It is week 26 of the current year. Fiona has earned a cumulative pay of €17,000 by the end of week 25. She has paid €2,890 tax on this amount. In week 26, Fiona earned €600. This is how her tax is calculated this week:
Cumulative pay at week 26: €17,600
Cumulative tax up to week 25: €2,890
Cumulative cut-off point at week 26: €14,300
Cumulative tax credits at week 26: €1,200.16
|Taxed at 20%
||Apply the standard rate of 20% up to the limit of the cumulative cut-off point(€28,600 / 52 weeks x 26
weeks = €14,300).
|Taxed at 40%
||Apply the higher rate of 40% to income above the cumulative cut-off point (€17,600 - €14,300).
|Gross cumulative tax
||Add the amount of tax at the standard rate to the amount of tax at the higher rate.
|Less cumulative tax credits
||Take away the cumulative tax credits per the income tax week. (€2,400 / 52 weeks x 26
weeks = €1,200).
|Cumulative tax payable
||Gross tax less tax credits.
|Cumulative tax paid
||Take away the total tax Fiona has already paid so far this year.
|Tax payable this week
||This is deducted from Fiona's gross pay of €600 this week. Fiona’s net pay is €510 (€600 - €90).