If you are moving to Ireland from a European country, especially from a European Union country, paying taxes on income is no news. But different countries have different tax obligations – so how it works in Ireland?
In case you are wondering where your gross income will go, and what would be your salary after tax in Ireland, we’re here to sum it up for you.
Nearly all income is liable to tax – the tax on income that you earn from employment will be deducted from your wages from your employer on behalf of Revenue.
Once you receive your payslip, you will see the following deductions: PAYE, PRSI, and USC.
● Pay As You Earn (PAYE) – the amount of tax that you have to pay depends on the amount of income that you earn and your personal circumstances. We’ll get back to this in more detail.
● Pay Related Social Insurance (PRSI) – the amount you pay is based on your earnings and the type of work you do. The law makes your employer responsible for PRSI, though you may have to pay an employee’s share. The amount of PRSI paid by you and your employer depends on your social insurance class.
● 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.
Under the PAYE system, income tax is charged on all wages, fees, perks, profits or pensions, and most types of interest. It’s payable on all kinds of earnings that result from your employment – bonuses, overtime, non-cash pay, or work benefits (such as the use of a company car, tips, etc.).
In case you have received some inheritance or a gift, you may have to pay Capital Acquisitions Tax, or Capital Gains Tax if you have sold an asset.
Tax, in general, is charged as a percentage of your income. In Ireland, it depends on the amount of your income. The first part of your income is taxed at 20%, which is known as the standard rate of tax, and the amount that it applies to is the standard rate tax band.
Higher earnings are taxed at a rate of 40%. Your taxes will also depend on your marital status, and dependent members.
Standard rate cut-off points for:
● Single person
● Married couple/civil partners, with one income
● Married couple/civil partners, with two incomes
● One-parent family
You can download the table here.
In 2022, the standard rate cut-off point for a married couple or civil partners is €45.800. If both are working, this amount is increased by the lower of the following:
● €27.800 or
● the amount of the income of the spouse or civil partner with the smaller income
If one person is earning €50.000 and their spouse or civil partner is earning €30.000 the standard cut-off point for the couple is €50.000 plus €30.000. The increase in the standard rate band is not transferable between spouses or civil partners, so the first spouse or civil partner’s tax bands would be calculated as €45.800 @ 20% = €9.160 and €4.120 @ 40% = €1.648.
The second spouse or partner’s tax bands would be calculated as €27.800 @ 20% = €5.560 and €2.200 @ 40% = €880.
Tax credits reduce the amount of tax that you have to pay and are deducted after your tax has been calculated so the tax credit has the same value to all taxpayers.
You may be entitled to various tax credits depending on your personal circumstances -there are different types of tax credits and reliefs, as well as tax reliefs for people with disabilities.
As your tax is calculated, the tax credit is deducted from this to reduce the amount of tax that you have to pay.
Is all of this giving you a headache already? Okay, before you move forward with calculating your income tax, you’ll need to subtract the following from your income:
● Pension contributions
● Payments to a Permanent Health Benefit Scheme (to a maximum of 10% of income) – this ensures continued income in the event of an injury, accident, or sickness
● Tax allowances
● Work expenses that were necessary to carry out your work duties Your taxable pay is then taxed at 20% of income below the standard rate cut-off point. The amount in excess of the cut-off point is taxed at 40%. This gives your Gross Tax.
The value of your tax credits is then subtracted from this to give the amount of tax that you have to pay.
Or to make it as simple as possible, here is the salary calculator.
If you wish to find out more on the topic, here are some links that could help you with that:
● Citizens information – Money and tax
● Citizens information – Tax
● Citizens information – Personal finance
● Revenue – Jobs and pensions
● Revenue – Personal tax, credits, reliefs and exemptions
Life in Ireland for foreigners may seem a bit complicated, to begin with, but we are here to help you out on the most important matters of your new life.
If this is the first blog you’ve come across, make sure to read more about life in Ireland in our blog section.