Tax and Starting Work in Ireland (PAYE)
Most employees in Ireland pay tax through the PAYE (Pay As You Earn) system. This means that your employer deducts the tax you owe directly from your wages, and pays this tax directly to the Revenue Commisioners. The Revenue Commissioners collect taxes from citizens on behalf of the Irish Government.
It is important to ensure that your tax is dealt with properly from the start and that your new employer deducts the right amount of tax from your pay. To ensure that this happens, you will need to do two things:
- Give your employer your PPS No. (formerly known as your RSI No.). This number is your unique personal identification number for public services in Ireland. Your employer will then let your tax office know that you have started work and that they are your employers.
- Apply for a certificate of tax credits. You will need to complete an application form to do this. It is called Form 12A Application for a Certificate of Tax Credits and Standard Rate Cut-Off Point (pdf)
Your own personal circumstances dictate the amount of tax credits you are entitled to. The tax office will then forward you a detailed statement of your tax credits. Your employer will also be notified of your tax credits.
Tax credits reduce the amount of income tax that you have to pay. Your gross tax is calculated depending on your income. Tax credits are then deducted from the gross tax to give the amount of tax that you have to pay.
Tax credits consist of various credits and relief's which you may be able to claim, depending on your circumstances. (Every individual can claim a personal tax credit for example, and you can also claim relief for items such as private health insurance premiums, mortgage interest etc.). Details of all the main tax allowances and reliefs (including the amount due for the current year) are given on the explanatory leaflet issued to you each year from the Revenue Commissioners with your certificate of tax credits. This information is also available from your tax office or online from the website of the Revenue Commissioners.
What do I have to pay tax on?
Tax is payable on earnings of all kinds that result from your employment (including for example, bonuses, overtime, non-cash pay or 'benefit-in-kind' such as the use of company car, tips, Christmas boxes etc.). You do not pay tax on: scholarship income, interest from savings certificates, savings bonds and national instalment savings schemes with An Post, and payments to approved pension schemes.
Pay that you receive through working extra hours (overtime), bonuses etc., is included as part of your taxable pay for that week or month. You do not get any additional tax-free allowances against these additional earnings.