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What do I do about tax when starting work?

I am about to start working for the first time and I want to know what I must do to sort out my tax. Where can I get some basic information that will tell me what I need to know?

First of all, welcome to the tax system.

Revenue will try to make it as easy as possible for you to understand your entitlements and obligations. The following questions and answers are designed to give you enough information to get your tax sorted out in time for your first pay cheque.

If having read the following material you still have some questions you would like answered, please don't hesitate to telephone or call to any Revenue office. A full list of our office addresses and telephone numbers is shown in the green pages section of your telephone directory and in our Contact Us Section.

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What do I need to do?

Your new employer must deduct tax from your pay under the PAYE (Pay As You Earn) system. To make sure that your tax is sorted out from the start and that your employer deducts the right amount of tax from your pay you should do two things:

  1. Give your employer your PPS No. formerly RSI (Revenue and Social Insurance) number. He/she will then let the tax office know that you have started work.
  2. Apply for a certificate of tax credits by completing pdfForm 12A - Application for a Certificate of Tax Credits and Standard Rate Cut-Off Point (PDF, 211KB) and sending it to the tax office. Your employer may have a supply of form 12s. Your employer will advise you of their employers registered number and to which tax office the completed form 12A should be sent. If your employer does not have a form 12A, you can get one from any tax office or telephone 01 - 8655002.

Ideally, you should do all this as soon as you accept an offer of a job - even if it is only part-time or holiday job. This will give your employer and the tax office time to get things sorted out before your first payday.

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What happens next?

The tax office will send you a certificate of tax credits, which sets out in detail the amount of tax credits and standard rate cut off point due. The tax office will also send a certificate of tax credits to your employer, which shows the total amount of your tax credits and standard rate cut off point.

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When do I start to pay income tax?

You will normally start to pay tax from your first payday. The amount of tax you pay depends on your level of pay and the amount of your tax credits. If your tax credits on any payday are in excess to your gross tax you don't pay tax on that payday. If your gross tax is more than your tax credits, the tax you pay is the difference between the two, i.e. gross tax less tax credits.

If you start work in (say) the 27th week of the tax year your employer will calculate your gross tax on your wages, but you will have 27 weeks tax credits to offset against this liability, this will continue till you utilise all your unused tax credits.

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What do I pay tax on?

You pay tax on earnings of all kinds arising from your employment including bonuses, overtime, non-cash pay - known as benefit-in-kind e.g. 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.
  • Payments to approved pension schemes.

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How are overtime pay, bonuses etc. taxed?

Your weekly / monthly tax credits are set against your full weekly/monthly gross tax. If you earn overtime or bonus pay etc., these amounts are included as part of your pay for that week or month. You do not get any additional tax credits against these additional earnings.

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Do I pay tax on everything I earn?

Your weekly/monthly wage is taxed at the standard rate of tax up to your weekly/monthly cut off point; any income in excess of your cut off point is taxed at the higher rate of tax. Your weekly/monthly tax credits are offset against this gross tax to give you your tax payable figure.

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What are Tax credits?

Under the tax credit system every individual is entitled to tax credits depending on personal circumstances. Every individual can claim a personal tax credit. PAYE taxpayers can also claim a PAYE tax credit. Relief may also be claimed for medical insurance premiums, mortgage interest etc.

For details of the main credits and reliefs see information leaflet Leaflet IT 1 - Tax Credits, Reliefs and Rates.

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What must I do to get my Tax credits?

As outlined above, when you start work for the first time, complete Form 12A, send it to your tax office and you will receive a certificate of tax credits and standard rate cut off point.

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How do I get the benefit of my Tax credits?

Your tax credits are given to you for a full tax year. So, whether you start work in the first week of the tax year or six months into the tax year, you still qualify for a full years tax credits. As tax deductions are spread evenly throughout the year under the PAYE system, the total due is divided into 52 weekly/12 monthly amounts, depending on frequency of pay. Your employer grants these credits against your gross tax to arrive at your tax payable.

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What happens if I don't follow the procedures above?

If you don't follow the procedures above your employer is obliged to deduct tax on the emergency basis.

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What is emergency tax and how do I avoid paying it?

If an employer does not get either a: Certificate of Tax Credits and Standard Rate Cut-Off Point or Form P45 (parts 2 and 3) from an employee he/she obliged to deduct tax on the emergency basis when paying an employees wages or salary. Under the emergency basis a temporary tax credit is given for the first month of employment but tax deductions are increased progressively from the second month on.

To avoid paying emergency tax you should follow the steps set out in reply to the question: What do I do about tax when starting work?

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I am taking up a job during the holidays - what is my tax position?

Holiday work or part-time work is taxable in the same way as any other employment. If you are starting work for the first time you should follow the steps as set out in What do I do about tax when starting work?

If your gross tax is less than your tax credits, you will not have to pay tax - provided you have applied for a certificate of tax credits. If you have paid tax but you are entitled to additional credits you may claim a refund of some or all of the tax paid, see I have finished work and am going back to school/college, can I claim a refund of tax?

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I have finished work and am going back to school / college, can I claim a refund of tax?

  1. Am I entitled to a tax refund?
  2. How do I apply?
  3. What happens after I apply?
  4. What if I am going back to school/college but will continue to work part-time at weekends etc.?

Am I entitled to a tax refund?

If you have paid tax and are returning to school or college you may be able to claim a refund from the tax office of some or all of the tax paid, depending on the level of your income and unused tax credits. If you have not paid any tax, you cannot claim a refund.

How do I apply?

You should complete pdfForm P50 - First Claim for Tax Repayment during Unemployment (PDF, 365KB) and send it to your tax office together with Form P45 (Parts 2 & 3) which will be given to you by your former employer. When completing the Form P50 you should indicate, if such is the case, that you don't intend to resume employment before the following 31 December because you are returning to school/college.

What happens after I apply?

The tax office will send you details of the refund of tax (if any) and a cheque for the amount overpaid.

What if I am going back to school/college but will continue to work part-time at weekends etc.?

If you continue to work part-time you cannot claim a refund of tax. However, the amount of tax you pay will depend on the level of your pay and the amount of your tax credits. If your gross tax per week is less than your tax credits per week then you won't have to pay any tax.

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I am going to work abroad but will remain resident for Irish tax purposes. How will my employment income be treated?

For any tax year that you are resident[1] in Ireland you will be liable to Irish income tax on your total income from all sources including any income from a foreign employment. You will be entitled to your full tax credits.

If your income is also taxed abroad in a country with which Ireland has a double taxation agreement you will be given relief as specified in the relevant agreement. This is normally provided by either exempting the income from tax in one of the countries or by crediting the foreign tax paid against your Irish tax liability on the same income. If you are going to a country with which Ireland has not got a double taxation agreement you will be liable to Irish tax on your foreign income net of foreign tax paid.

[1] There are specific rules governing residence and non residence for tax purposes, you may also be entitled to some additional allowances/reliefs as an Irish resident working abroad. For further details and information see Leaflet Res.1: Going to Work Abroad - A Guide to Irish Income Tax.

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I am going to work full time abroad with a new employer - what is my tax situation?

If you are resident[2] in Ireland during the tax year you leave and you will be non-resident[2] for the following tax year you will be deemed to be non-resident from the date of your departure. This means that your employment income abroad will be exempt from Irish tax from that date.

To avail of this arrangement you must satisfy the tax office of your intention not to be resident in Ireland for the tax year following your departure. If you do so, you will be deemed to be non-resident from the date of your departure and will be entitled to full personal tax credits for the complete tax year. This means that you may be entitled to a tax refund based on the unused portion of your tax credits.

To claim this refund, you should complete Form P50 and send it to your tax office together with Form P45 (Parts 2 & 3) given to you by your former employer. When completing the Form P50 you should indicate your country of destination, intended departure date and the expected duration of your stay abroad.

[2] There are specific rules governing residence and non residence for tax purposes, for further details and information see: Leaflet Res.1: Going to Work Abroad - A Guide to Irish Income Tax.

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I am coming to Ireland to take up a temporary employment and will not become resident for Irish tax purposes. What tax credits are I entitled to?

For any tax year during which you are non-resident[3] and non-ordinarily resident[3] in Ireland you will be chargeable to tax on your income from Irish sources only.

If during the tax year in question you are a resident of another Member State of the European Union and 75% or more of your world-wide income for this year is taxable in Ireland you will be entitled to full tax credits and reliefs.

Proportionate credits and reliefs are available to non-resident Irish citizens, to citizens, subjects or nationals of another European Union Member State and to residents or nationals of a country with which Ireland has a double taxation agreement that provides for such allowances. The proportion of credits is determined by the relationship between your incomes for the tax year that is subject to Irish tax, over your income from all sources.

[3] There are specific rules governing residence and non residence for tax purposes, for further details and information see Tax Residence.

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Is there any tax relief available for the payment of College / Training Course Fees?

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