How your income tax is calculated
Nearly all income is liable to tax. Tax on income that you earn from employment is deducted from your wages by your employer on behalf of the Irish Government. This is known as Pay As You Earn (PAYE). The amount of tax that you have to pay depends on the amount of the income that you earn and on your personal circumstances. There are a range of income tax reliefs available that can reduce the amount of tax that you have to pay.
The Universal Social Charge (USC) is a tax on your income. It is charged on your gross income before any pension contributions or PRSI. You cannot use tax credits or tax relief (except for certain capital allowances) to reduce the amount you must pay. Find out more in our document on the Universal Social Charge .
It was announced in Budget 2015 that the standard rate tax band will increase by €1,000 from €32,800 to €33,800 for single individuals and from €41,800 to €42,800 for married couples with one income from January 2015. The higher rate of income tax will reduce from 41% to 40%.
Notice of determination of tax credits and standard rate cut-off point
At the start of the tax year, the Revenue Commissioners will send you a Notice of determination of tax credits and standard rate cut-off point. This shows the rate of tax
that applies to your income and the tax credits that reduce the tax payable. Revenue will also send a summary of this certificate to your employer so that your employer can deduct the correct amount of tax. If your circumstances change during the year Revenue will issue a revised certificate.
If you are changing job or starting work for the first time, and your employer has not received this information from Revenue or a previous employer, you will be taxed on a temporary basis called emergency tax. You can get more information about tax and starting work or changing job .
Tax rates and the standard rate cut-off point
Tax is charged as a percentage of your income. The percentage that you pay depends on the amount of your income. The first part of your income, up to a certain amount, is taxed at 20%. This is known as the standard rate of tax and the amount that it applies to is known as the standard rate tax band.
The remainder of your income is taxed at the higher rate of tax. 40% in 2015.
The amount that you can earn before you start to pay the higher rate of tax is known as your standard rate cut-off point. See case studies for an example of how to calculate income using tax rates and the standard rate cut-off point.
Standard rate cut-off pointsSource: www.citizensinformation.ie