Working in Ireland: Information on tax credits, tax bands and allowances

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Working in Ireland: Irish Taxation

How does Irish taxation work?
Taxation in Ireland is calculated on a system of tax credits. Income tax is deducted directly from your salary by your employer. This tax is paid by your employer directly to the Irish Revenue commissioners.

When is the Irish tax year?
The 'tax year' in Ireland operates on the calendar year basis (January - December). At the start of each 'tax year', you will receive a statement from the Revenue Commissioners called a "Notice of determination of tax credits and standard rate cut-off point". This info rmation is used to calculate your personal tax liability.

Tax Credits in Ireland
Tax credits are the part of your income on which you are not liable for tax. In other words you can earn or receive a certain amount of income before you begin to pay tax.

Tax credits consist of various allowances and reliefs which you may be able to claim, depending on your circumstances. Every individual has their own personal tax credit and additional allowances on items such as private health insurance premiums and mortgage interest can be claimed. Details of all the main allowances and reliefs are given on the explanatory leaflet issued to you each year from the Revenue Commissioners with your certificate of tax credits.

This info rmation is also available from your tax office or online from the website of the Revenue Commissioners.

The Standard Rate Cut-off Point
Your standard rate cut-off point is calculated by the Revenue Commissioners by adjusting your standard rate band (downwards for any non-PAYE income and upwards for any tax reliefs available at the higher rate of tax). Any income above your Standard Rate Cut-Off Point is taxed at 42%.

To calculate out how much tax you will pay under the tax credit system, you need to do the following:
  1. Tax all of your income to find your "gross tax". Income below the Standard Rate Cut-Off Point is taxed at 20%. Any income above the Standard Rate Cut-Off Point, is taxed at 42%.
  2. Take your Tax Credits away from your gross tax. This gives you the amount of tax you pay.
Example:
Example of a single person without dependent children earning 30,000 euro over a full tax year:

Step 1 - Calculate Gross Tax on 30,000 euro. Tax 29,400 euro @ 20% (Standard Rate Band is 29,400 euro and there are no adjustments so standard rate cut-off point is 29,400 euro = 5,880 euro. Tax the remaining 600 euro @ 42% = 252 euro. Total gross tax = 6,132 euro

Step 2 - Tax Payable. Total Gross Tax = 6,132 euro. Less tax Credits = 1,580 euro. Tax Payable = 4,552 euro. The above is based on a full tax year.

It is important to check with the Revenue Commissioners that you are claiming all the Credits you are entitled to (see Revenue leaflet IT1).

For further info rmation about the PAYE system of tax in Ireland , tax reliefs and rates for 2005: http://www.revenue.ie/ (remember to have your PPS Number to hand for enquiries).

Where to Apply for Tax Credits:
East and South East Region
Meath, Kildare, Laois, Tipparary, Waterford , Wexford, Wicklow, Kilkenny and Carlow
Lo-Call: 1890 44 44 25

South West Region
Clare , Limerick , Kerry and Cork
Lo-Call: 1890 22 24 25

Dublin Region
Dublin City and County
Lo-call: 1890 33 34 25

Border Midlands West Region
Donegal, Leitrim, sligo, Mayo, Galway , Ros common, Longford, Offaly, Cavan, Monaghan, Westmeath and Louth
Lo-Call: 1890 77 74 25