Saturday, March 12, 2011

Self employed and the Income Tax

In this post we consider the Revenue’s 2008 income distribution statistics for the self- employed.  As no table is directly provided on the self-employed, the numbers used are generated as the difference between those on Table IDS2 (self-employed including proprietary directors) and Table IDS7 (proprietary directors).  We use the same format as before.

Here are the the number of self-employed tax cases in each income bracket.

SE Income Tax Cases 2008

There 49,780 of these cases filed jointly where both partners were income earners so this table covers 228,986 earners.  In the self-employed category 11.3% had incomes greater than €100,000 compared to 4.0% in the PAYE category.  The proportion in the top range is significantly higher than for the PAYE group, 2.5% versus 0.2%.

Here is the income earned in each of these income ranges.

SE Income Earned by Range 2008

This group had an income of €10.1 billion or 11.1% of the total reported.  Nearly 24% of the income earned was done by the 2.5% of cases in the top income category.  The average income earned was €56,465, though if we account for double-income joint filings, the average income per earner is just €44,190.  The median income is around €32,000.

Next we turn to the tax paid across the income ranges.

SE Income Tax Paid by Income Range 2008

This group paid 11.8% of the total income tax.  Within this group 42.6% was paid by the 2.5% in the top income category.  The bottom 54% of self-employed cases, earning €35,000 or less paid 4.3% of the income tax.

Finally we’ll look at the effective tax rates and average amount of tax paid.

SE Effective Tax Rate and Average Tax Paid 2008

Again the tax rates are progressive but it is interesting to note that the effective rates for high-earning self-employed people are lower than the equivalent rates for PAYE taxpayers.  The effective rate in the top income range here is 25.5% while it is 34.1% in the PAYE group.  However, the overall effective rate among the self-employed at 14.3% is higher then the equivalent in the PAYE group 12.5%.

SE Income Tax Distribution 2008

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