What does PAYE Modernisation mean for my tax refund?
Revenue has launched 'PAYE Modernisation' – something it describes as the most significant change to the Irish PAYE tax system since it was first launched in 1960.
There are two aims behind PAYE Modernisation.
The main intention behind the change is to make life easier for employers and employees alike by removing many tax forms and associated paperwork.
PAYE modernisation should also provide enhanced transparency to Irish workers on their tax position throughout the year.
So what's changing for Irish taxpayers?
The good news is that taxpayers do not have to do anything as a result of these changes. In fact, many Irish workers may not even notice that anything has changed at all!
However, every employer will be aware of PAYE Modernisation as it involves a shift in the way they report payments and tax deductions to Revenue.
Most Irish taxpayers will be used to receiving a P60 (a certificate detailing total pay and deductions including PAYE, PRSI and the Universal Social Charge) at the start of each tax year and a P45 (a statement of pay and deductions for the year up to the date) upon leaving a job.
However, as a result of the new system, both of these forms have now been scrapped and replaced by a 'real time, comprehensive financial summary' of a person's employment history.
In other words, under PAYE Modernisation, employers will now send Revenue details of pay, tax and other statutory deductions for each of their employees or pension recipients every time they get paid – therefore P60s are no longer required.
Similarly, instead of being issued with a P45 when you leave a job, your employer will submit the details of your final pay and deductions to Revenue.
Can I still claim a tax refund?
The reform of the system, and in particular the receipt of real time payroll information, has enabled Revenue to provide extended online services to taxpayers.
But, when it comes to tax refunds, little is changing.
The good news is that taxpayers no longer have to wait to be issued with a P60 before claiming their entitlements.
Refunds can instead be claimed from the first day of the tax year.
However, the onus remains on taxpayers to claim all of their entitlements.
Commenting on the launch of PAYE Modernisation, Taxback.com CEO Joanna Murphy said:
"Anything that improves and speeds up the process of taxpayers getting their entitlements is good news.
"It's important to remember though that the onus of responsibility remains with the taxpayer, so it's necessary for them to be familiar with the entitlements that are available to be claimed.
Medical expenses
Medical expenses were the most common type of tax relief claimed by Taxback.com customers in 2018/19. This is perhaps not surprising as most people incur medical expenses – even just a routine expense once a year.
"The overall average refund claimed by our clients for the year came to €1,076," says Murphy. "While there is a plethora of reliefs that can be claimed, medical expenses are definitely the refund that is claimed most often.
"Trips to the doctor's surgery can cost anywhere from €40 to €70, so if a family takes even just 5 trips to their GP in a year and that bill hits approximately €250 – you could get €50 of this back from the Revenue. It makes so much sense to claim."
However, despite the range of tax reliefs out there for people to claim, there are still thousands of Irish taxpayers not availing of their entitlements.
"Taking medical expenses as a case in point, Revenue figures show there were 482,200 applications for this relief in 2017; up from 454,700 in 2016. So, the figures are going up but are still well below what they should be when you consider the number of taxpayers in the country – most of whom will have some medical expenses during a 4 year period.
Taxback.com have put together a list of 10 refunds that people may or may not be aware of, but that apply to many taxpayers across the country:
Top 10 tax reliefs to claim in 2020!
- Medical Expenses
- Tuition Fees
- Flat Rate Expenses
- Working from Home Relief
- Home Carers Credit
- Nursing Home Relief
- Rent a Room Relief
- Employing a Home Carer Tax Relief
- Dependant Relative Credit
- Home Renovation Incentive and Rent Relief (both have now been phased out but can still be claimed for retrospectively in certain circumstances)
"Taxpayers stand to gain an extra €1,000 in their pockets, which is a significant windfall for any individual or household. Claiming is not a difficult process, and you can claim back for the previous four years.
"We want to encourage as many people as we can to apply for a tax refund, submit their expenses and ensure that they are getting back any reliefs they may be owed from the taxman," Murphy concluded.
The average Irish tax refund is €1,880
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