Income Tax Brackets In Ireland

Income Tax Brackets In Ireland: Explained

Emerald Isle beckons, but so does its taxman!

Before you enjoy those rolling green hills or Dublin’s vibrant nights, it’s wise to decode Ireland’s income tax brackets.

Dive in, and let’s make sense of those euros and cents!

What Are The Taxes On Individual Income In Ireland?

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There are two primary systems of income taxes that one has to pay taxes in accordance with, in Ireland on one’s income:

  1. Pay As You Earn (PAYE)
  2. Universal Social Charge (USC)

In Ireland, almost all of the income earned by the residents is taxed. Pay As You Earn (PAYE) is the income tax that the employer deducts from one’s pay. The amount that one is liable to pay for taxes depends on one’s income as well as one’s circumstances.

The Universal Social Charge is a tax other than PAYE that an individual has to pay on one’s total income. One is supposed to pay this amount before making any personal deductions from the income. 

What Are The Income Tax Brackets In Ireland?

Tax brackets refer to the range of incomes on which a certain tax percentage is charged. Every country has its own specific income tax brackets and the tax rate charged on each income tax bracket.

In Ireland, the tax is charged as a percentage of income. 20% tax is charged on the first part of one’s income. This is known as the standard rate of tax.

The amount on which the standard rate of tax is applied is known as the standard rate tax band.

The rest of the income earned in Ireland is charged at a higher rate of tax, which is 40%. The 40% tax is charged on the amount only when one earns more than the standard rate cut-off point.

Standard Rate Cut-off In Ireland
Filling Status of Tax PayersYEAR 2023YEAR 2022YEARS:2021, 2020 and 2019
20%40%20%40%20%40%
Single/Widowed Person€40,000Remaining Amount€36,800Remaining Amount€35,300Remaining Amount
1-income (Married couple/civil partners) €49,000Remaining Amount€45,800Remaining Amount€44,300Remaining Amount
2-Incomes (Married couple/civil partners) Up to €80,000Remaining AmountUp to €73,600Remaining AmountUp to €70,600Remaining Amount
Single Parent€44,000Remaining Balance€40,800Balance€39,300Remaining Amount

This table shows Ireland’s standard rate cut-off point for the last three years.

Certain factors like tax credits and tax allowances reduce the taxes one has to pay. So, to understand tax brackets and how the taxation system works in Ireland, one also needs to understand different taxation terms like:

  • Tax Credits
  • Tax Allowances
  • Tax Certificates

Tax Credits

The tax credits help one to pay less in taxes. The tax credit is deducted from the total amount of taxes after it’s calculated. The tax credit is constant; it does not depend on whether one pays a higher or lower tax.

The tax credit is allotted to one according to one’s circumstances. Once the taxpayers have been categorized into specific tax classes, it becomes easier to calculate the tax credits. 

It is a helpful initiative for people who have disabilities or have a dependent family.

Tax Allowances

Other than tax credits, tax allowances also allow one to pay less tax in Ireland. However, the tax allowances, unlike tax credits, are not fixed amounts. Instead, it depends on the highest tax one has paid.

Allowances are also deducted from one’s income before the income is taxed. So, the remaining income is taxed at the standard rate of 20%, while any amount that is more than the standard cut-off rate will be taxed at 40%.

Tax Certificates

The tax certificates are the documents that show a verified calculation of one’s taxes and the tax credit score. One can download the tax certificate from the official website for taxation in Ireland.

The Taxation and Revenue Department of Ireland issues the taxation certificate yearly to the registered taxpayers. One also gets an RPN (Revenue Payroll Number) that allows one to deduct the specific credit score and allowances from one’s taxes.

One’s employer calculates an employee’s taxes through the Tax credit certificate and RPN. It has to see the following factors:

  • Cumulative Basis
  • Week 1 Basis
  • Temporary Basis or Emergency Tax

Cumulative Basis

Mostly, people in Ireland are taxed on a cumulative basis. On a cumulative basis, one’s tax credit score and allowances are calculated from the end of one tax year to the start of a new tax year. 

In some cases, people might not need to use the tax credit score or allotted tax allowances in a particular year, and then these allowances will be well-spent; instead, one has the option to add it to the taxes to be paid next year.

Week 1 Basis

On certain occasions, one might be asked to pay the taxes weekly or monthly. This way of calculation is known as the non-cumulative basis. 

During this non-cumulative basis, the employer will subtract the taxes from one’s income on a weekly basis. 

Temporary Basis

One is taxed temporarily in Ireland, usually when either one is changing jobs or starting work for the first time. 

Who Is Liable To Pay Taxes In Ireland?

In Ireland, all the incomes earned anywhere by the Irish Citizens are liable to taxes. If the individual is a resident of Ireland and is an Irish resident, then one would need to register all the sources of income for taxes. 

However, if the individual is a resident of Ireland but does not have an Irish domicile or citizenship, then one would need to pay taxes on all the incomes earned in and from Ireland. So, all the Irish-sourced incomes and remittances received in Ireland will be taxed.

If a person is only a non-resident of Ireland and has stayed in Ireland on a long-term basis, any income earned by the non-resident in Ireland through Irish-sourced then one would need to pay taxes on that. 

Also, the Irish tax system divides individuals into different tax classes so that the amount of taxes levied on them can become accurate and proficient. 

What Are The Tax Classes In Ireland?

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In Ireland, the taxes levied on one’s income depend on the amount of income and circumstances. So, the individuals are categorized into different classes, making it easy to charge taxes on their incomes fairly. 

The main tax classes are given below:

Tax Class 1: (Single/Widowed) 

This class has single people or widowed people with no dependents. Thus, the taxes levied on them are based on their income.

Tax Class 2: (Married/Civil Partnership) 

This tax class is allotted to people who are married or living in a civil partnership and earn income. Tax credits and tax rates depend on the collective income of the couple. 

Tax Class 3: (Single/Widowed With Children) 

If a person is single or has become widowed and has family and primarily dependent children, they may fall into this class.

Compared to other tax classes, lower tax rates are levied on them to help with extra financial responsibilities in looking after children and other family members. 

Tax Class 4: (One Earner In A Married Couple Or Civil Relationship)

This tax class has people with only one breadwinner in a relationship or marriage. Thus, the applied taxes will consider not just one income but also the fact that the other partner is dependent on the earner.

Tax Class 5: (Both Partners Earn In a Married Couple Or Civil Relationship)

This tax class charges tax on both partners as both earn an income. So, the taxes charged will be on the combined incomes of the people.

Tax Class W: (Widowed Person In The Year Of Bereavement)

If a partner of the individual passes away, the taxes charged on the income of the widowed individual applied in the year of grief will be different than that of the standard years.

Tax Class P: (Pensioner)

This tax class is for those individuals who have retired from their jobs and are now receiving pensions. The tax charges that apply to pensioners are different from those of regular income receivers.

Tax Class S: (Seafarers)

This tax class is mainly for the people who work on the ships. The people working on the sea get certain tax advantages compared to those working on the land.

When Does One Have To Change Tax Class In Ireland?

Belonging to different tax classes can lead one to have different tax credits and allowances. Thus, it needs to be strictly monitored and adhered to the specific regulations when one can change the tax class. 

Some of the following authenticated cases have been mentioned when one would need to mention or apply for a change in Tax class in Ireland:

  • Getting Married or Acquiring a Civil Partnership
  • Getting separated from a partner or getting a divorce.
  • Having a Child
  • Losing of a spouse or bereaving a spouse.
  • Changing jobs.
  • Change in Residence status.
  • Differences in Income
  • Change in personal circumstances.

How To Change One’s Tax Class In Ireland?

One would need to follow a particular procedure to apply for a tax class change to get the associated tax credit and tax allowances with the relevant tax class.

The steps to follow for changing the tax class are as follows:

  • Download the form from the official website.
  • Gather the relevant documents that prove the change in circumstances.
  • Contact the Irish Revenue Commissioners to submit the form and documents.
  • Review the payroll after the approval of the change in tax class.

How Is The Income Evaluated For Taxes In Ireland?

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According to the PAYE system in Ireland, income tax is charged on all types of incomes, including wages, fees, bonuses, overtime incomes, profits, or pensions. Even any type of interest is also liable to the PAYE tax.  

If any income that is not taxed in Ireland is mainly because it falls under the type of taxes, like inheritances, and for any gifts or any property, one might need to pay Capital Acquisitions Tax and Capital Gains Tax.

The tax rate implied on the income of the individuals can be calculated according to their filing status. The individuals having the following filling statuses would be charged 20% or 40% tax accordingly, as shown in the table below:

Filing Status Of Irish ResidentsTax Rate 20%Tax Rate 40%
Single or a widowed person (no dependent family)Income up to 40,000 EURIncome above 40,000 EUR
Married couple with one incomeIncome up to 49,000 EURIncome above 49,000 EUR
A married couple with two incomes Income up to 80,000 EURIncome above 80,000 EUR

Before calculating the precise income taxes, one needs to subtract the tax credit and allowances. So, one should deduct the following from one’s income to get the exact taxable pay:

  • Pension contributions
  • Payments to a Permanent Health Benefit Scheme 
  • Salary used for a Travel Pass Scheme or Bike to Work Scheme

After the deductions, one can get the taxable pay. It will then be taxed at:

  • 20% of income below the standard rate cut-off mark
  • 40% of income above the standard rate cut-off mark

After all of this calculation, one will be able to get the Net/Gross Tax. 

What Are The Tax Exemptions For Irish Residents?

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One of the exemptions that Irish residents can avail of is an income tax exemption for individuals above the age of 65. The concession bestowed on them is that they may only pay taxes if their income is:

  • Above 18,000 EUR for single or widowed individual 
  • Above 36,000 EUR for married couples. 

The exemption limit can be expanded if they have dependent children or other families. People above the age of 65 get complete exemptions, but one gets partial exemption on some incomes:

  • Certain payments from approved pension schemes
  • Scholarship Income
  • Social Welfare Incomes
  • Interest from savings certificates and Savings Bonds and National Installment Savings Schemes. 
  • Income received by people with disabilities linked with Thalidomide.
  • Wins from licensed lotteries
  • Some army pensions and allowances
  • Payments by Health Service Executive to foster parents.
  • Compensation for personal injury.

In some cases, one may be paid low, and one may not be able to pay any tax because the tax credits and reliefs are more than or equal to the amount of tax one has to pay.

What Are The Tax Deadlines In Ireland?

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The deadline for filing income tax returns in Ireland is October 31 of each tax year. The taxpayers whose tax is paid through the PAYE system must submit Form 12 before the deadline. 

However, those people who have to pay taxes through the non-PAYE system and have more than 5000 Euros in tax would need to register through the Self-Assessment Income Tax System and submit a filled Form.11 with the required documents.

Form No. #11 needs to be submitted before November 9 of each year. The deadlines are crucial for the Irish Taxation system; one may suffer fines and, in some cases, punishment if one does not pay the taxes.

Conclusion

Navigating the Irish tax landscape needn’t be as mystifying as Celtic legends. With a clear grasp of the tax brackets, you’re set to manage your finances like a local.

Here’s to a prosperous stay in the land of saints and scholars!

Tax Triumph!

But wait! There’s lot more that you might be interested in to follow:

  • Tax Declaration In Ireland
  • Tax Consulting In Ireland
  • Tax Return Software In Ireland

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