Question

Jacqueline Elliott is employed to Make-All Co. Limited since 2009 and worked her way up from filing clerk now to assistant general manager. In 2014, her annual pay package included: salary of $890,000 and bonuses (10% of salary); she also received director’s fees of $15,000.00 per month from January for 12 months. Elliott was contracted by her father as a consultant for his marketing company. He paid her $170,000.00 from his personal bank account and his company reimbursed him what he paid his daughter that is after paying her $520,000.00 to complete her contractual agreement. She contributes 10% of her gross emoluments to a Pension Plans of Make-All Co. Limited and also her father’s company. Her national insurance contribution is 2.5% of her gross emoluments up to a maximum of $3,000,000.00.

1. Calculate PAYE deductions of Elliott for the year ending December 31, 2014?

2. How much would be the net pay of Elliott?

3. What is the income tax threshold/personal allowance in 2014 in Jamaica? NB.

Question 3 must be completed before you can do questions 1 & 2

Answer 1

Answer 3 : The income tax threshold/ personal allowance in 2014 in Jamaica is $507,312

Answer 1 : Total Earnings for Jacqueline Elliot

   Gross Salary : $890,000

   Bonus : $890,000* 10% = $89,000

   Director's Fees : $15,000* 12 = $180,000

Income as a Consultant : $520,000 + $ 170,000 = $690,000

Total Gross Income : $ 1,849,000

Less: Pension Cont. = 10% of $1,849,000 = $184,900

Less: NIC 2.4% of gross income = $46,225

Statutory Income = $1,849,000-$184,900- $46,225 = $1,617,875

Education tax = 2.25% of Statutory Income = 2.25% of $1,617,875 = $36,402

NHT = 2.5% of Gross Pay = $1,849,000 * 2.5% = $46,225

Less : Income tax threshold = $507,312

Taxable Income = Statutory Income- Income Tax threshold = $1,617,875 - $507,312 = $1,110,563

Answer 1 : PAYE Deductions : $1,110,563 * 25% = $277,641

Answer 2: Net pay = Gross Pay- NHT-Education Tax-NIC- Pension Contribution-PAYE Deductions = $ 1,257,607