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Joe, Émile, and Wei are all PAYE workers - Leaving Cert Mathematics - Question 3 - 2022
Question 3
Joe, Émile, and Wei are all PAYE workers. Each of them has an annual tax credit of €3300. Their tax rates and bands are shown in the table below. Assume that no othe... show full transcript
Worked Solution & Example Answer:Joe, Émile, and Wei are all PAYE workers - Leaving Cert Mathematics - Question 3 - 2022
Step 1
Joe's net annual income.
Answer
To find Joe's net annual income, we calculate the tax he owes.
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Calculate the income subject to the lower tax rate:
- Income subject to tax = €27,500 - €3,300 (tax credit) = €24,200
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Apply the tax rate:
- Tax owed at 20% = €24,200 * 0.20 = €4,840
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Finally, calculate Joe's net income:
- Net annual income = Gross income - Tax owed = €27,500 - €4,840 = €22,660.
Step 2
Émile's net annual income.
Answer
To find Émile's net annual income, follow these steps:
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Calculate the taxable amount after applying the tax credit:
- Taxable income = €43,450 - €3,300 = €40,150
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Calculate the tax owed:
- Tax at 20% on the first €35,300 = €35,300 * 0.20 = €7,060
- Tax at 40% on the remaining income: €40,150 - €35,300 = €4,850,
- Tax at 40% = €4,850 * 0.40 = €1,940
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Total tax due:
- Total tax = €7,060 + €1,940 = €9,000
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Calculate the net income:
- Net annual income = Gross income - Tax owed = €43,450 - €9,000 = €34,450.
Step 3
How much Wei's gross annual income will need to increase by.
Answer
To find how much Wei's gross annual income must increase, we calculate:
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Wei needs her net income to increase by €80 per month,
- Annual increase required = €80 * 12 = €960.
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Calculate the proportion of this increase taxed:
- Assuming 60% of the increase will be taxed at 20%,
- Net from an increase of €X = €X - (€X * 0.20) = 0.8X.
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Set up the equation:
- 0.8X = €960
- X = €960 / 0.8 = €1,200.
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Therefore, Wei's gross annual income must increase by €1,200.