PAYE - Employee Tax Credit

Who can Claim?

You can claim the PAYE tax credit if you are earning an income which is taxable under the PAYE system. This includes wages, salary, benefit-in kind, occupational pensions, Department of Social Protection pensions, etc.

Conditions

  • The current amount of the PAYE tax credit is €1,650. This is calculated as follows: €8,250 (gross) @ 20% = €1,650.
  • If you earn less than €8,250, the PAYE tax credit will be restricted to 20% of your PAYE income (as the PAYE tax credit cannot exceed this amount).

Example 1

You are married or in a civil partnership and taxed under joint assessment. Both you and your spouse or civil partner are earning an income which is taxable under PAYE.

Claimant: Self - Income: €30,000 - Tax Credit: €1,650 (max.)

Claimant: Spouse or Civil Partner - Income: €5,000 - Tax Credit: Restricted to €1,000 - (€1,000 (€5,000 @ 20%))

Total Relief due: €1650 + €1,000 = €2,650

 

Example 2

Claimant: Self - Income: €30,000 - Tax Credit: €1,650 (max.)

Claimant: Spouse or Civil Partner - Income: €25,000 - Tax Credit: €1,650 (max.)

Total Relief due: €1650 + €1,650 = €3,300

  • Any restriction which may arise will be calculated by reviewing your income tax liability at the end of the year.
  • If you are married or in a civil partnership, and both you and your spouse or civil partner are earning an income, which is taxable under PAYE, you are both entitled to claim this tax credit against your own income.
  • The PAYE tax credit is not transferable between spouses or civil partners and any unused portion cannot be carried forward to future years.
  • There is only one PAYE tax credit due per person no matter how many employments you have.

The tax credit is not due to:

  • Proprietary directors, their spouses or civil partners or children* .
  • The spouse or civil partner or child of a person paying the income.
  • The spouse or civil partner or child of a partner in a partnership.

*Children of proprietary directors are entitled to the PAYE tax credit where:

  • The child’s employment is in a qualifying PRSI contribution class.
  • PAYE has been correctly deducted from the child’s income.
  • The child devotes the whole of their time to the employment.
  • They are paid at least €4,572 per year. This may be apportioned on a time basis.

Additional Information

A proprietary director is the company's beneficial owner or director who can control directly or indirectly more than 15% of company's ordinary share capital.

Note: From 1 January 2016 a proprietary director may be entitled to claim the Earned Income tax credit. This tax credit can also be claimed by self-employed individuals who are ineligible for the PAYE tax credit.

Where an individual has earned income that qualifies for both the PAYE tax credit and the Earned Income tax credit the combined tax credits cannot exceed €1,650.

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