Income Levy
Revenue eBrief 15/10, which issued on the 30 March 2010, included the composite rate at which the income levy is charged on all relevant income for the full year 2009.
A number of queries have been received regarding the end of year calculation of the income levy on Schedule E income, where the levy had been deducted at source during the year.
The composite rates are to be applied to all relevant income for the year, including Schedule E income, which may have already suffered the income levy at the the different rates in force for the periods 1 January 2009 to 30 April 2009 and 1 May 2009 to 31 December 2009.
An additional liability to the income levy may arise for individuals with Schedule E income for the period 1 January 2009 to 30 April 2009 only. Depending on the level of their income, they may not have met their full obligations to the income levy using the composite rates when recalculated using the composite rates.
Likewise a reduction in Schedule E income in 2009 in the second period may result in an underpayment of the income levy overall as a greater portion of the income will have been subject to the lower rates of levy in place for that period.
The following examples demonstrate how underpayments may arise. In the first example the individuals income remains constant for the year. In the second example the income is lower for the second period.
Example 1.
An individual with flat rate of income of €1,980 per week throughout the year.
Income Levy deducted under Sch E.
Initial period: 1,925 @ 1% = 19.25
55 @ 2% = 1.10
Total 20.35 x 18 = 366.30
Later period 1,443 @ 2% = 28.86
537 @ 4% = 21.48
Tota l0.34 x 34 = 1,711.56
Total for the year (366.30 + 1711.56) 2,077.86
Income Levy due
Income for the year 102,960
75,036 @ 1.67% = 1,253.10
25,064 @ 3% = 751.92
2,860 @ 3.33% = 95.24
Total levy due 2,100.26
less Income levy deducted under PAYE 2,077.86
Balance due 22.40
Example 2.
An individual has income of €2,150 per week for the first 18 weeks and €1,890 for the remaining 34 weeks.
Levy deducted under Sch E.
Initial period: 1,925 @ 1% = 19.25
225 @ 2% = 4.50
Total 23.75 x 18 = 427.50
Later period 1,443 @ 2% = 28.86
447 @ 4% = 17.88
Total 46.74 x 34 = 1,589.16
Total for the year (427.50 x 1589.16) 2,016.66
Income Levy due
Income for the year 102,960
75,036 @ 1.67% = 1,253.10
25,064 @ 3% = 751.92
2,860 @ 3.33% = 95.24
Total levy due 2,100.26
less Income levy deducted under PAYE 2,016.66
Balance due 83.60
An underpayment of €83.60 for underdeducted levy arises in this case.