Save Tax – Employ the family

1.Employing a child.

Employing a child in a business means that child can earn up to €18,300 tax free (although the income levy could apply) if the proprietor of the business registers as an employer for PAYE and PRSI purposes). This figure takes account of only the personal and employee tax credits. There is no completely clear guide on liability for PRSI/health levy purposes and the final decision rests with the Department of Social and Family affairs. In some cases where PRSI is payable, benefits such as unemployment benefits may also be payable to the child.

2.Employing a Child still at School

It is also possible for the employed child to be under the age of 16, in which case they  pay no PRSI.Close relatives working in a family business are exempt from the requirements of the Protection  of Young Persons Employment Act 1996 (provided the health and safety of the youth is not put at risk.) The general minimum age for regular job is age 16 but a 14 year old may be employed on light work outside of school term time, subject to a maximum of 35 hours a week on holiday work  or 40 hours a week on work experience.

3.Employing a Spouse.

A single income family hits the 41% tax bracket on earnings above €45,400 whereas a jointly assessed double income family can earn up to €72,800 before hitting the higher tax bracket, although this must be split €45,400 to one spouse and €27,400 to the other. This tax break is also non transferrable between spouses, so if one of the income s cease, it cannot be claimed by the other spouse.

4.Employing a Spouse with PRSI Entitlements (Old Age Pension).

It is not possible for a sole trader to employ their spouse in the business and pay PRSI which will entitle the spouse to benefits such as the Old Age Pension (unless a formal commercial partnership exists which is difficult to prove,) although it is possible to do this if you dealing with the employment of a  spouse in a limited company.

5. Lower Exemption Limit.

Married couples, either one of whom is over age 65 can earn up to €40,000 between them tax free and income levy free. One spouse can earn the full €40,000 tax free if the other spouse has no income.

6. Home Carers Allowance.

If one spouse is not working because he or she chooses to stay at home caring for a child or children, this can be claimed by the working spouse as an additional tax credit of €900, not an insignificant amount. Some people mistakenly believe this tax credit only applies if the child is disabled but this is not the case.