The tax system in Ireland has changed, with a new online system being introduced in line with PAYE modernisation. Since December 2018, the system no longer relies upon the P45 and P60 documents, and instead uses an Employment Detail Summary, accessed via the Revenue online system, myAccount service.
This system is easier to understand than the previous tax system, and has been introduced to increase efficiency and accuracy, but it may have an impact in several different circumstances, so it is important to understand the changes and what they mean for you. The changes to the tax system are especially important if you are leaving a job or starting a new job in Ireland, and you will find further information about these circumstances here.
PAYE, or ‘Pay As You Earn’, is the system by which employees usually pay tax. When your salary is paid, you will receive the balance after deductions for Income Tax, Universal Social Charge (USC) and Pay Related Social Insurance (PRSI) have been made. These deductions are paid to Revenue, and the total amounts you pay during the year are collected evenly across all of your pay days throughout each tax year by PAYE.
PAYE also applies to those who receive an occupational pension from a previous employer.
If you are leaving a job, or starting a new job, you will need to ensure that you and your employers follow the correct procedures so that your tax calculations and records are correct, and you will no longer require a P45 when leaving a job, or a P60 at the end of each tax year.
An Employment Detail Summary is the new replacement for the P60 and P45 documents, and is an online system. You can view and manage your Employment Detail Summary using Revenue’s myAccount service, and this will be based on information that your employer provides to Revenue.
Your Employment Detail Summary will contain all the details of your pay, including the deductions that your employer has paid to Revenue, such as income tax, USC and PRSI. You may also choose to have your Local Property Tax (LPT) deducted from your pay, and this will also be shown in your Employment Detail Summary if you do so.
When you leave a job, your employer will update your details using the Revenue online system, including your leaving date and the details of your final pay and deductions.
You can register with Revenue’s myAccount service online, and you will then be able to access the service on mobile devices via the Revenue’s RevApp as well as from your computer. Once registered, you can log into your myAccount system and see your Employment Detail Summary, which will be your record of your pay and income deductions for the year, as reported by your employer or pension provider. You may view or print this information as a document, and this can be used to provide proof of income to third parties. You will also be able to check that the deductions from your pay have been made correctly, and that the details your employer has provided about your pay are correct. You will not see any non-statutory deductions, such as payments to your credit union or union subscriptions, in your Employment Detail Summary, as these are not included.
You can find out more about the Employment Detail Summary from Revenue online.
When you leave a job, you will no longer receive a P45 from your employer, but instead, your employer will update your Employment Detail Summary by including the date of leaving on the final payroll submission they make for you.
Your final payroll submission on your Employment Detail Summary will include your pay and any statutory deductions made, such as income tax, Universal Social Charge, Local Property Tax and Pay Related Social Insurance. You can log into the myAccount service to manage the pay and tax information your employer has supplied for the job you are leaving.
If your employer does not update the Employment Detail Summary to reflect the fact that you have left your job, you can update this yourself by selecting ‘Update Job or Pension Details’ on the PAYE Services card.
When you start a new job, you must provide your Personal Public Service Number (PPSN) to your new employer. It is then the responsibility of your new employer to inform Revenue of the date on which you start. When this is done, your employer will receive a Revenue Payroll Notification (RPN) so that the correct deductions can be made from your wages, and you will be issued with a Tax Credit Certificate. A new employment record will be created for you on myAccount, and your new employer will be able to access the current tax credits and tax rate bands for you.
You can also register your new job on myAccount yourself if your new employer does not inform Revenue of your starting date. In this circumstance, you should select ‘Update Job or Pension Details’ on the PAYE Services card to update your details.
If this is the first job you have had in Ireland, you will need to register the job in the ‘Jobs and Pensions’ section of the myAccount service. You can find more information about how to do this here.
If you do not provide your new employer with your Personal Public Service Number (PPSN), or if you are not registered for PAYE, when you start a new job, your employer will need to deduct emergency tax from your wages. If this happens, you will receive a temporary tax credit for your first month of employment, but your tax deductions will increase after this. When you pay emergency tax, you will receive no tax credits after four weeks, and you will pay tax at the higher rate from week nine, regardless of the amount you are paid. You can avoid this situation by ensuring that you provide your PPSN as soon as you begin working for a new employer, and you should check that this has been received and entered into your Employment Detail Summary.
When you are registered with PAYE, you may be entitled to receive tax credits or tax reliefs and exemptions, which will reduce the amount of tax you pay. You can find out more about tax credits, reliefs and exemptions from Revenue online services here.
The changes to the tax system are intended to make it much easier for employees to manage their pay and tax information, and to streamline the process for employers. It is also hoped that it will significantly reduce cases of tax evasion and fraud, which cost the country significantly every year. Revenue Chairman, Niall Cody, reminded businesses that early engagement with the Revenue is essential if there are problems with tax compliance, and he advised business owners to seek advice as soon as possible under these circumstances. He stated that resolving payment difficulties with phased payment arrangements is much easier when businesses and individuals work with the Revenue, and confirmed that at the end of 2019, more than 5,800 businesses and individuals had contacted Revenue to make arrangements to repay more than €72m in debt.
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