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From the following figures calculate the net pay of Hazel Dunne - Leaving Cert Business - Question 10 - 2010

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From the following figures calculate the net pay of Hazel Dunne. Gross Pay €50,000, Tax Credits €6,000 Standard Tax Rate 20% Higher Tax Rate 41% Cut-off Point €36,40... show full transcript

Worked Solution & Example Answer:From the following figures calculate the net pay of Hazel Dunne - Leaving Cert Business - Question 10 - 2010

Step 1

Calculate the Gross Tax

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Answer

To calculate the tax, we break it down into two parts: one taxed at the standard rate and the other taxed at the higher rate.

  1. Standard Rate Tax: The cut-off point for the standard rate is €36,400. Thus, the income taxed at 20% is €36,400.

    Tax at 20%:

    36,400imes0.20=7,28036,400 imes 0.20 = 7,280

  2. Higher Rate Tax: The remaining income above the cut-off point is:

    50,000−36,400=13,60050,000 - 36,400 = 13,600

    Tax at 41%:

    13,600imes0.41=5,57613,600 imes 0.41 = 5,576

Step 2

Calculate Net Pay

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Answer

Gross Tax Calculation: Now we sum the taxes calculated:

extTotalGrossTax=7,280+5,576=12,856 ext{Total Gross Tax} = 7,280 + 5,576 = 12,856

Subtract Tax Credits: The tax credits amount to €6,000, which needs to be subtracted from the gross tax:

extTaxPayable=12,856−6,000=6,856 ext{Tax Payable} = 12,856 - 6,000 = 6,856

Final Net Pay Calculation:

extNetPay=50,000−6,856=43,144 ext{Net Pay} = 50,000 - 6,856 = 43,144

Step 3

State two tax credits a person may be entitled to

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Answer

  1. Personal Tax credit (single, married, widowed)
  2. PAYE Tax credit

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