What is the personal income tax like in Ireland?

Personal income tax in Ireland operates on a progressive system, meaning that higher income levels are subject to higher tax rates. Understanding the main components of personal income tax, such as income tax bands, Universal Social Charge (USC), Pay Related Social Insurance (PRSI), and available tax credits, is essential for managing your financial obligations. Here's a breakdown of how personal income tax works in Ireland.

Income Tax Bands and Rates

Ireland’s income tax system has two main tax bands:

Standard Rate (20%): The first €42,000 of income for a single person is taxed at 20% (as of 2024).
Higher Rate (40%): Any income above €42,000 is taxed at 40%.

This progressive structure ensures that higher earners pay a greater percentage of their income in taxes.

Tax Credits

Tax credits directly reduce the amount of tax you owe. Here are the personal tax credits for 2024:

Single Person: €1,875
Married Person or Civil Partner: €3,750
Widowed Person or Surviving Civil Partner with Dependent Child(ren): €1,875
Widowed Person or Surviving Civil Partner without Dependent Child(ren): €2,415
Widowed Person or Surviving Civil Partner - Year of Death: €3,550

Additional Tax Credits for Widowed Parents

Widowed parents are entitled to additional tax credits, which decrease over time:

1st Year After Death: €3,600
2nd Year After Death: €3,150
3rd Year After Death: €2,700
4th Year After Death: €2,250
5th Year After Death: €1,800

Universal Social Charge (USC)

The USC is a tax applied to your gross income, with different rates depending on your income level. For 2024, the USC rates are:

First €12,012: 0.5%
Next €13,748 (income between €12,012 and €25,760): 2%
Next €44,284 (income between €25,760 and €70,044): 4%
Balance (income over €70,044): 8%

The USC ensures that even those on lower incomes contribute a smaller amount, while higher earners contribute more.

Pay Related Social Insurance (PRSI)

PRSI is a mandatory social insurance contribution that funds various social welfare benefits. Here’s how it works:

Employee Contribution: Employees pay 4% of their gross income towards PRSI if their income exceeds €352 per week.
Employer Contribution: Employers also contribute a percentage of the employee’s income to PRSI, supporting the overall social welfare system.

Tax Relief

Certain expenses and contributions can reduce your taxable income:

Pension Contributions: Contributions to approved pension schemes are tax-deductible, reducing the amount of income subject to tax.
Health Expenses: Relief is available for qualifying health expenses, with a tax credit of 20% on eligible costs.

Filing and Compliance

Most employees in Ireland pay their income tax through the PAYE (Pay As You Earn) system. Here’s how it works:

PAYE System: Employers deduct income tax, USC, and PRSI directly from your salary and remit it to the Revenue Commissioners.
End-of-Year Process: At the end of the tax year, employees may review their tax situation to ensure they’ve paid the correct amount and claim any additional tax credits or reliefs.

In this article...

Ireland