Taxation in Ireland
Income tax (PAYE) and Pay Related Social Insurance (PRSI) is chargeable on all income earned by individuals in the tax year subject to certain exceptions and exemptions. An employee’s tax is deducted by their employer, through the Pay As You Earn (PAYE) system. If you are self-employed, or have income where some or all of the tax cannot be collected under the PAYE scheme you will be responsible for paying your own tax and submitting annual Self-Assessment tax returns.
What does PAYE stand for?
PAYE stands for Pay As You Earn. As the name suggests, this means that every time your employer / pension provider pays you your salary / occupational pension he or she must deduct income tax, PRSI and USC, where due and pay the amount deducted to Revenue. The PAYE system ensures that the yearly amounts you have to pay are collected on each payday over the tax year.
How is PAYE calculated?
PAYE is normally calculated on a cumulative basis, which means that your yearly tax credits and rate bands are evenly divided over the 52 weeks of the tax year. In some circumstances when it is not possible to tax you on a cumulative basis, income tax is deducted on a non-cumulative basis (also known as a week-1 basis). In this instance, your yearly tax credits and rate bands are granted from the date your Tax Credit Certificate (TCC) is issued and not backdated to the start of the tax year.
What is Pay-Related Social Insurance (PRSI)?
PRSI is a contribution, calculated on a percentage of your earnings and is paid into the Social Insurance Fund. It is collected by your employer through the PAYE system and your employer also makes PRSI contributions on your behalf. Your PRSI contributions may entitle you to claim a wide range of benefits from the Department of Social Protection (DSP), such as Jobseeker’s Benefit, Illness Benefit and State Pensions. Generally, all employees (aged over 16 and under 66) pay PRSI.
Further information relating to PRSI is available from the Department of Employment Affairs and Social Protection website on www.welfare.ie
What is the Universal Social Charge (USC)?
USC is a tax payable on your gross income, including benefits from your employer (for example a company car) and other non-cash payments. It is calculated before deducting your pension contribution. There are different USC rates that apply depending on your particular circumstances and the amount of your income. If your gross income is below a certain amount, you will be exempt from paying USC.
For more information see Universal Social Charge FAQ’s (PDF, 829KB).
When does the Income Tax year start?
The income tax year runs on a calendar year basis from 1 January to 31 December.
What should I do when I start working in Ireland?
When you start your first job you must register your details with Revenue to avoid paying emergency tax and USC. This is a three step process:
Step 1. Apply for a Personal Public Service (PPS) Number. if you do not already have one ( INSERT LINK)
Step 2. Register for myAccount
Step 3. When you receive your password, register your new job using the Jobs and Pensions service in myAccount
The Revenue Commissioner step by step guide is available at
http://www.revenue.ie/en/tax/it/leaflets/it11.html#section1
FRONTIER WORKERS
A frontier worker pays income tax in the country where he/she earns their income, but also has a tax responsibility to the Country where they live so they must submit an annual self-assessment each year e.g. If you live in Ireland and work in Northern Ireland you pay income tax in Northern Ireland but you must also make a tax return to the Revenue Commissioners in Ireland. A double taxation Agreement exists which ensures that you do not pay tax on the same income twice.
