Tax Credits and Standard Rate Cut-Off Point (SRCOP)
WHAT ARE TAX CREDITS
Tax credits are credits that are applied annually, to each taxpayer's account, to reduce their tax liability. Tax credits are allocated, by Revenue, based on each taxpayer's personal circumstances, e.g. single person or married or in a civil partnership.
A tax credit reduces the tax an employee pays on their income. Some credits are fixed amounts, like the single or married person's credit; others depend on the amount you spend, like tuition fees. Refer to Calculating PAYE for a complete working example of deducting PAYE.
Tax Credits and SRCOP: Example of Tax Credit
WHAT IS THE STANDARD RATE CUT-OFF POINT (SRCOP)
An employee's Standard Rate Cut-Off Point (SRCOP) is the amount of their personal standard rate tax band 20%. For each pay period, tax is paid at the standard rate of 20% (rates for 2019) up to the SRCOP. For the balance of earnings above the SRCOP the higher rate of tax of 40% (rates for 2019) is applied. For current rates, please refer to Revenue website.
Tax Credits and SRCOP: Example of SRCOP
Refer to Calculating PAYE for a complete working example of deducting PAYE.
It is the responsibility of each employee to manage the allocation of tax credits, SRCOP and any declaration to Revenue in terms of PAYE/USC Exempt status.
Using the PAYE Anytime service, accessible through myAccount on Revenue's website, employees can manage their taxes online, including:
- updating personal information
- view their tax record
- claiming tax credits
- reallocate credits between them and their spouse/civil partner
TAX CREDIT CERTIFICATE (TCC)
Revenue issues a Tax Credit Certificate to every employee who makes a claim for tax credits. The certificate sets out in detail the amount of tax credits and standard rate cut-off point (SRCOP) that Revenue has determined to be due to the employee. The Tax Credit Certificate issues to the employee when:
- making a first application for tax credits
- re-issues each tax year thereafter
- amended Tax Credit Certificate issued due to a change in individuals personal circumstances
- individual commences new/additional employment
- annually for each new tax year
Revenue will also issue a Tax Credit Certificate to an individuals employer, either on paper or electronically by means of a RPN file (2018- called P2C). CollSoft offers functionality to facilitate the import of the RPN file (2018- called P2C) to update the Revenue details of employees by reading the tax credit certificate details from their RPN file (2018- called P2C) electronic version and applying the changes to each employee by the pairing of PPSN.
Information regarding the personal circumstances of the employee is NOT disclosed on the Tax Credit Certificate issued to the employer.
It only shows the total amount of the tax credits and SRCOP to which the employee is entitled and the tax basis to be used in applying the details of the Tax Credit Certificate against the earnings of the employee in that employment.
Tax Credits and Standard Rate Cut-Off Point: Tax Credit Certificate (TCC)
The basis of deduction is stated at the top of the paper Tax Credit Certificate (TCC). Where deductions are to be made using the cumulative basis, the TCC will state that the certificate is effective from 1 January YYYY.
Where deductions are to be made using the week 1/month 1 basis, the TCC will state that the certificate is effective from 1 July YYYY… ‘on a Week 1/Month 1 Basis’.
The basis of deduction stated on the TCC applies to both PAYE and USC. Where an employee is on cumulative basis for PAYE, they will be on cumulative basis for USC, and vice versa. Where an employee is on a Week 1 basis for PAYE, they will also be on a Week 1 basis for USC, and vice versa.