How Irish Income Tax Works
A complete guide to understanding PAYE, tax bands, and how your income tax is calculated in Ireland.
In this guide:
What is PAYE?
PAYE stands for "Pay As You Earn". It's the system used by Revenue (Ireland's tax authority) to collect income tax from employees. Under the PAYE system, your employer deducts tax from your wages each time you're paid and sends it directly to Revenue.
The amount of tax deducted depends on:
- Your gross income (before deductions)
- Your tax credits (which reduce your tax bill)
- Your standard rate cut-off point (determines how much is taxed at each rate)
- Your marital status and personal circumstances
The advantage of PAYE is that you don't need to worry about setting money aside for tax - it's automatically handled by your employer based on instructions from Revenue.
Irish Tax Rates and Bands
Ireland has a progressive tax system, which means the more you earn, the higher percentage of tax you pay on your additional income. There are two tax rates:
20%
Standard Rate
Applied to income up to your cut-off point
40%
Higher Rate
Applied to income above your cut-off point
The key question is: at what point does the 40% rate kick in? This is determined by your Standard Rate Cut-Off Point (SRCOP), which varies based on your personal circumstances.
Standard Rate Cut-Off Points (2025)
Your cut-off point determines how much of your income is taxed at 20% before the 40% rate applies. Here are the standard cut-off points for 2025:
| Status | Cut-Off Point |
|---|---|
| Single person | €44,000 |
| Married couple (one income) | €53,000 |
| Married couple (two incomes)* | Up to €88,000 |
| Single parent | €48,000 |
*For married couples with two incomes, the cut-off can be increased by the lower of: the second spouse's income or €31,000 (2025).
How Your Tax is Calculated
Your income tax is calculated in three steps:
Calculate gross tax
Apply 20% to income up to your cut-off point, then 40% to anything above.
Subtract tax credits
Deduct your personal tax credits from the gross tax figure.
Result = tax payable
The result is your actual income tax liability.
Worked Example
Let's calculate the income tax for a single person earning €60,000 per year:
Step 1: Calculate Gross Tax
First €44,000 @ 20% = €8,800
Remaining €16,000 @ 40% = €6,400
Gross Tax = €8,800 + €6,400 = €15,200
Step 2: Subtract Tax Credits
Personal Tax Credit: €1,875
Employee Tax Credit (PAYE): €1,875
Total Credits = €3,750
Step 3: Final Tax Payable
Gross Tax: €15,200
Less Tax Credits: -€3,750
Income Tax Payable = €11,450
Note: This example only covers income tax. You would also pay USC and PRSI on top of this amount. Use our tax calculator to see the complete breakdown.
Tax Credits Explained
Tax credits directly reduce the amount of tax you pay. Unlike deductions (which reduce your taxable income), credits are subtracted directly from your tax bill, making them very valuable.
The most common tax credits include:
- Personal Tax Credit: €1,875 (single) or €3,750 (married)
- Employee Tax Credit: €1,875 (for PAYE workers)
- Earned Income Credit: €1,875 (for self-employed)
- Home Carer Credit: €1,800 (if spouse cares for dependents)
- Single Parent Credit: €1,750
For a complete guide to tax credits, read our Tax Credits Guide.
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