What is Pay As You Earn (PAYE) in Ireland?

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If you work in Ireland, understanding PAYE tax is important for managing your earnings and tax payments. This guide explains what PAYE tax is, how PAYE tax rates apply, and what deductions are made each pay period. Learn how to apply for tax credits, check your tax details on Revenue, and ensure you’re paying the correct amount. Find out if you’re eligible for a PAYE refund and how to claim it through a tax return.

The information provided here is for informational and educational purposes only and does not constitute financial advice. Please consult with a licensed financial adviser or professional before making any financial decisions. Your financial situation is unique, and the information provided may not be suitable for your specific circumstances. We are not liable for any financial decisions or actions you take based on this information.

Every time you receive your salary, tax is deducted from your wages. In Ireland, PAYE (Pay As You Earn) is the system used to collect these taxes. Everyone is required to pay PAYE tax, except for those who are self-employed. The PAYE system ensures that your annual tax liability is collected gradually throughout the tax year, with deductions made on each payday.

This means your employer deducts income tax, Pay-Related Social Insurance (PRSI), and Universal Social Charge (USC) before paying the remaining salary to you. These deductions are then sent directly to Revenue, Ireland’s tax authority. PAYE also applies to individuals receiving an occupational pension from a former employer.

Revenue, officially known as the Revenue Commissioners, is Ireland’s tax authority responsible for collecting taxes, duties, and other state levies. It administers the PAYE system, ensuring that employees' income tax, Pay-Related Social Insurance (PRSI), and Universal Social Charge (USC) are deducted from their wages and paid to the state.

The Pay As You Earn (PAYE) tax rate in Ireland refers to the combination of taxes deducted from an employee’s wages before they receive their salary. Under the PAYE system, employers automatically withhold three key deductions: income tax, Universal Social Charge (USC), and Pay-Related Social Insurance (PRSI). The amount an employee pays depends on their income level, tax bands, and personal circumstances.

These deductions ensure that taxes are collected throughout the year, preventing the need for large tax payments at the end of the tax year. Below is a breakdown of the different tax rates that apply under PAYE in Ireland.

• Income Tax: This is the primary tax on earnings and is charged at 20% on income up to a certain threshold and 40% on earnings above that threshold. The exact tax bands depend on factors like marital status and whether a person has children. Income tax funds public services such as healthcare, education, and infrastructure. 

• Universal Social Charge (USC): This is an additional tax on gross income, applied in a tiered system where different portions of earnings are taxed at different rates. The lowest earners (under €13,000 per year) are exempt. USC helps fund important state services, including social protection and healthcare.

• Pay-Related Social Insurance (PRSI): A contribution made by employees (and sometimes employers) that funds social welfare benefits such as pensions, unemployment benefits, and maternity leave. PRSI payments determine an individual’s entitlement to state benefits and pensions.

The PAYE tax calculation is based on your total earnings, tax credits, and any allowances or reliefs you qualify for. While PAYE provides a structured way to collect taxes, it’s important to note that the amount deducted is an estimate of what you owe for the year. Adjustments may be necessary if your income changes, you claim additional tax credits, or your circumstances affect your tax liability.

Step-by-Step PAYE Calculation

Determine Gross Pay

• This includes salary, bonuses, overtime, and any taxable benefits.

Apply Income Tax Bands

• The first portion of your income is taxed at 20% (standard rate).
• Any income above the standard rate threshold is taxed at 40% (higher rate).
• Tax credits (such as the Personal Tax Credit) reduce the final tax amount.

Calculate Universal Social Charge (USC)

• Different portions of income are taxed at varying USC rates (0.5%, 2%, 4.75%, 8%, or 11%).
• Income below €13,000 per year is exempt from USC.

Deduct Pay-Related Social Insurance (PRSI)

• PRSI contributions depend on your earnings and PRSI class (typically Class A for employees).
• Most employees pay 4% PRSI on income above €352 per week.

Subtract Tax Credits

• Common tax credits include the Personal Tax Credit (€2,000 for a single person in 2025) and the Employee Tax Credit (€2,000).
• Tax credits reduce the total Income Tax owed but do not apply to USC or PRSI.

As an employer, it is important to register with Revenue before hiring and paying employees. Once registered, employers must calculate and deduct income tax, Universal Social Charge (USC), and Pay-Related Social Insurance (PRSI) from their employees' gross pay.
Employers are also required to:

• Report payroll information to Revenue in real time, either on or before the employee’s payday.
• Submit PAYE deductions to Revenue on time to ensure compliance with tax regulations.
• Update Revenue when an employee leaves the company, so their tax records can be adjusted accordingly.

Failure to comply with PAYE reporting and payment obligations can result in penalties from Revenue. Employers can use Revenue’s Payroll Reporting System or a compliant payroll software to ensure accuracy in their submissions.

As an employee in Ireland, your income tax, USC, and PRSI are deducted from your salary under the PAYE system. This ensures that your tax is paid throughout the year rather than in a lump sum.

Here are the key things you need to know about the PAYE payments:

• Automatic deductions: Your employer deducts income tax, USC, and PRSI before you receive your wages.
• Tax credits reduce your tax bill: Applying for a Tax Credit Certificate (TCC) ensures you receive the correct relief, reducing the amount of income tax deducted from your salary. It is compulsory to apply for a TCC when starting a new job. If you don’t, your employer may have to deduct emergency tax at a higher rate until Revenue updates your details.
• Check your payslip: This shows your earnings, deductions, and net take-home pay. It is important to check your payslip regularly to ensure the correct amount of tax is being deducted and that you are receiving the right tax credits. Mistakes can happen, and reviewing your payslip helps you identify any issues early.
• PAYE simplifies tax payment: Instead of paying a lump sum at the end of the year, tax is collected throughout the year.

Yes, you can claim a PAYE tax refund if you have overpaid tax, often due to unused tax credits, emergency tax deductions, or eligible tax reliefs. Refunds can be requested for up to four years after the tax year in which the overpayment occurred. To claim back PAYE tax, you need to submit a tax return through Revenue’s myAccount or use a tax agent. 

However, if you have paid too little tax, Revenue will notify you, and you will be required to pay the outstanding amount. It's important to review your tax details regularly to avoid unexpected tax bills or missed refunds.

You can check your pay and tax details by logging in to Revenue’s myAccount portal. This online service allows you to view your payroll submissions, tax credits, deductions, and any refunds due. To access it, visit Revenue’s website and sign in using your Personal Public Service (PPS) number and password.

Using Revenue’s myAccount helps employees stay informed about their tax payments and ensures they are being taxed correctly under the PAYE system. Here are the most important features which help employees to see and manage the details of their PAYE tax.

• View your pay & tax details: See how much tax has been deducted from your salary.
• Manage your tax credits: Apply for or update tax credits to ensure you’re not overpaying tax.
• Check your tax bands: Understand how your income is taxed and whether you’re paying at the correct rate.
• Request a statement of earnings: Useful for mortgage applications or proof of income.
• Apply for a tax refund: Claim back overpaid tax within the four-year limit.

Now that you understand how PAYE works and how it affects your salary, you may want to explore ways to manage your finances more efficiently. Opening a bank account with Raisin Bank provides you with access to high-interest fixed term and demand deposit accounts, helping you grow your savings while keeping your finances organised. With a simple online registration process, you can choose from a variety of deposit accounts offered by partner banks across Ireland and Europe, allowing you to earn competitive interest rates on your savings. Raisin Bank offers a secure and convenient way to manage your money alongside your Irish bank account, helping you make the most of your earnings while staying on top of your PAYE obligations.