If you earn more than the exemption limit, you may be able to claim marginal relief. This means your tax is calculated in a different way in order to limit your tax liability. The relief is only be given when it’s more beneficial than calculating the tax due in the standard way and using your tax credits. The marginal relief rate is 40%.
Mary (67) is married with 2 qualifying children and an income of €38,000 in 2021 with a total tax credit of: €5440
Mary’s Tax Credits:
Personal Tax Credit: €3,300
Age Tax Credit: €490
PAYE tax credit: €1,650
Her exemption limit is €36,000+€575+€575(for each child). Here total exemption is €37,150,
Income: €38,000
Tax at 20%: €7,600
Deduct tax credits of: €5,440
Tax Due: €2,160
Income: €38,000
Less Exemption at: €37,150
Excess: €850
Total tax due at 40%: €340
In this case it’s better for Mary to be taxed at the marginal relief rate because the tax due is less than when she uses the tax credits.
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