The tax authorities determine the rate of withholding tax based on the last income declared by the taxpayer. The latter can opt for an individual rate or a neutral rate according to what suits him. The choice does not affect the final tax, but it will better manage the expenses related to the tax. It is possible to declare this option to be changed at any time. We will explain everything to you.
Taxes: why choose a neutral rate?
The tax authorities will automatically apply the personalized rate if the taxpayer does nothing. An employee can ask the tax authorities not to announce the tax rate of his tax household. This rate is revealing other employee income to his boss.
It can also reveal if the employee’s spouse has a better livelihood. If the tax authorities accept the request, the employer will use it wage neutral employee per month. For example an employee living in Metropolitan France with a net salary of 3,800 euros per month.
If your income goes down, remember that the tax authorities do not take this into account when calculating your withholding tax rate. Orient your #Tax as accurately as possible by adjusting your direct debits without delay so that they remain in your current situation https://t.co/LBaMGDpYSl pic.twitter.com/nH2yRnJDfX
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For salary between €3,543 and €4,134the withholding rate for taxes is 13.8%. If the employee is married, the neutral rate can be applied to the sole income of one of the spouses.
The effect of the neutral rate on cash flow
The employee should think carefully before choosing a neutral rate. The latter did not care employee’s family expenses nor his situation. Income taxes calculated at a neutral rate are usually higher than the personalized rate.
An option that can be expensive for the employee. However, if the neutral rate is lower than the personalized rate, the employee is obligated pay the difference to the taxpayer. The latter is even at risk of penalties if the payment of additional compensation is not sufficient.
For a person who has not yet filed a tax return, the head of the business neutral rate applies. The same is true for an employee who has just been hired if the tax authorities have not yet sent a personal rate.
It should be penalty for the taxpayer because the neutral rate corresponds to the status of a person without children. To avoid paying too much levy, you should request the calculation of a personal rate.
This calculation is based on an income estimate of the current year and the family status of the concerned principal.
Taxes: why choose the individual rate?
The personalized rate of the tax house usually applies to the salary income of people who are married or in a civil partnership. This option is not a problem if their income is the same.
When income disparity is large, those who earn less are paid an expensive rate relative to their income. With the individual rate, on the other hand, the PAS varies according to the income of each of the spouses. To request an individual rate application, you must a formal request to the tax authorities.
If the tax authorities send the rate to the employer, they must apply it at the latest 3 months. It has no effect on couple’s tax burdenbut the participations are different.
Example: A couple whose husband earns 2,000 euros and the wife 4,000 euros net per month. The torque rate is 10.1% of their monthly income. This rate represents 404 euros withheld tax for the woman. Her husband on her side must pay 202 euros to PAS.
In the personalized rate, only the husband pays 5.2% of his salary, ie 104 euros. The woman, on the other hand, pays a PAS to 504 eurosthat is 12.6% of his monthly income. The amount of withheld tax remains the same, but the payment is equally distributed.
A more profitable option
The individual rate of calculating taxes is more useful for those who want to earn salary increase. The employer cannot see that the employee’s spouse earns more than his employee.
Thus, he is more open to giving his employee a raise. In case there is a risk of separation, the individual rate represents another benefit. After the breakup, the taxpayer no longer has to bear a rate based on the salaries of both individuals.
Like the neutral rate, the individual rate only applies to salaries or retirement pensions. The use of these rates not suitable for property income. If the employee’s income changes during the year, it is necessary to request a downward or upward modulation of the tax rate.
Then, it is necessary to prove the will the application of an individual rate. Therefore, the employer will apply a new individualized rate according to the new salary amount.