Week One or Cumulative Basis
CUMULATIVE BASIS
The purpose of the PAYE system is to ensure that an employee’s tax liability is spread out evenly over the year, thus allowing the correct tax liability to be paid in full without causing hardship to the employee.
To ensure that this is achieved, PAYE & USC are normally calculated on a Cumulative Basis. This means when employers calculate the tax liability of an employee, they actually calculate the total tax due from the 1st January to the date on which the payment is being made. The PAYE tax and USC deducted in a particular week is the cumulative amount due from the 1st January to that date, reduced by the amount previously deducted to date.
Any tax credits and/or standard rate cut off point and/or USC cut off point, which are not used in a pay period, can be carried forward to the next period within the tax year. The cumulative basis also ensures that refunds can be made to an employee where the employee’s tax credits and cut off points have been increased.
Example
Week 12
An employee earns €700 per week. To date the employee has paid €1,001.86 in tax and €394.90 in USC
PAYE
Weekly Tax Credit €63.47
Weekly SRCOP €630.76
USC
Weekly €193 @ 2%
Weekly €308 @ 4%
Weekly Balance @ 7%
This example illustrates calculations based on tax week 12.
PAYE
Cumulative Taxable Gross Pay: €8,400.00 (€700.00 x 12)
Tax on €7,569.12 @ 20% €1513.82 (€630.76 x 12)
Tax on €830.88 @ 41% €340.67 (€8,400 - €7569.12)
Gross Tax €1854.49 (€1513.82 + €340.67)
Less Tax Credit (€761.64) (€63.47 x 12)
Net Tax (PAYE) To Date: €1,092.85 (€1854.49 – €761.64)
Cumulative Tax Paid up to Week 11 €1,001.77 as above
Net Tax (PAYE) Due This Week: €91.08 (€1092.85 – €1001.77)
USC
Cumulative USC Gross Pay: €8,400.00 (€700.00 x 12)
USC on €2,316 @ 2% € 46.32 (€193 x 12)
USC on €1,380 @ 4% € 55.20 ((€308 x 12) - (€193 x 12))
USC on €4,704 @ 7% € 329.28 (balance €8400 - €2316 - €1380)
Gross USC €430.80 (€46.32 + €55.20 + €329.28)
Cumulative USC paid up to Week 11 €394.90 as above
USC Due This Week: € 35.90 (€430.80 - €394.90)
WEEK 1 BASIS
If the week/month 1 basis applies, neither pay, tax credits, nor the standard rate cut off point nor USC cut off points are accumulated for tax and USC purposes. The pay for each week or month is dealt with separately. The tax credits, standard rate cut off point and USC cut off points for week/month 1 are used each week/month in the calculation of tax and USC due.
No refunds may be made in such cases.
Example (using same pay information as above)
Week 12
An employee earns €700 per week.
The Year to date Pay, Tax, USC, Tax Credits, SRCOP and USC cut off points are irrelevant for the purpose of this period calculation. All that is relevant is the single week tax credit, SRCOP and USC cut off point attributable solely to week 12.
PAYE
Weekly Tax Credit €63.47
Weekly SRCOP €630.76
USC
Weekly €193 @ 2%
Weekly €308 @ 4%
Weekly Balance @ 7%
This example illustrates calculations based on tax week 12.
PAYE
Taxable Gross Pay THIS PERIOD: €700.00
Tax on €630.76 @ 20% €126.15
Tax on € 69.24 @ 41% € 28.39 (€700 - €630.76)
Gross Tax THIS PERIOD €154.54 (€126.15 + €28.39)
Less Tax Credit (€63.47)
Net Tax (PAYE) Due THIS WEEK € 91.07 (€154.54 - €63.47)
USC
USC Gross Pay THIS PERIOD: €700.00
USC on €193 @ 2% € 3.86
USC on €115 @ 4% € 4.60 (€193 - €308)
USC on €392 @ 7% € 27.44 (balance €700 - €193 - €115)
Gross USC THIS WEEK € 35.90 (€3.86 + €4.60 + €27.44)
