Here is some information taken from www.citizensinformation.ie , hopefully it will help to guide you through the mine field of the topic of Irish Taxation.
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, 41%.
Tax Rates and Bands in Ireland
|Married couple One income||€43,000||Balance|
|Married couple Two incomes||€68,000||Balance|
|One parent family||€38,000||Balance|
Irish Tax allowances
Tax allowances reduce the amount of tax that you have to pay. The amount by which a tax allowance will reduce your tax depends on what your highest rate of tax is. This is because the allowance is subtracted from your income before it is taxed. In effect, it is ‘taken off the top’ of your income which can then be taxed at either the standard rate or the higher rate, depending on your income level.
If, for example, you have a tax allowance of 200 euro and your highest rate of tax is 20%, then this means that the amount of your income that is taxed at this rate is reduced by 200 euro and so your tax is reduced by 40 euro (200 euro x 20%). If you have the same tax allowance of 200 euro but the highest rate of tax that you pay is 42%, then the amount of your income that is taxed at 41% is reduced by 200 euro and so your tax reduction is 82 euro (200 euro x 41%).This is known as tax allowance at the marginal rate.
Irish Tax Credits
Tax credits reduce the amount of tax that you have to pay. They work differently to tax allowances because they are deducted after your tax has been calculated and so a tax credit has the same value to all taxpayers.After your tax is calculated, as a percentage of your income, the tax credit is deducted from this to reduce the amount of tax that you have to pay. So a tax credit of 200 euro, for example, will reduce your tax by that amount.
Calculating your Irish Tax
Before calculating your income tax, subtract the following from your income:
- Pension contributions
- Payments to a Permanent Health Benefit Scheme (to a maximum of 10% of income). This is a policy that will ensure continued income in the event of an accident, injury 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 41%. This gives your Gross Tax for Ireland.The value of your tax credits is then subtracted from this to give the amount of tax that you have to pay.