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Calculating your Income Tax

  1. Overview
  2. How your Income Tax is calculated
  3. What is the difference between gross and taxable pay?
  4. What is a tax rate band?
  5. What is an increased rate band?
  6. How tax credits work
  7. What is a Tax Credit Certificate?
  8. View your pay and tax details

How your Income Tax is calculated

If you are paid weekly, your Income Tax is calculated by:

  • applying the standard rate of 20% to the income in your weekly rate band
  • applying the higher rate of 40% to any income above your weekly rate band
  • adding the two amounts above together
  • deducting the amount of your weekly tax credits from this total.

If you are paid fortnightly or monthly, the same principles apply.

You can find the rate band for the current tax year and the previous four years in the Tax rates, bands and reliefs charts. Your rate band will be notified on your Tax Credit Certificate (TCC).

The examples below show how this works. (Universal Social Charge (USC) is not included in them, but can be seen in Calculating your USC).

You can use this worksheet to calculate your tax.

Payroll tax is normally calculated using the ‘cumulative basis’ for each pay day. All income and tax credits from the previous 1 January are accumulated to ensure you have paid the correct tax. This ensures that you have received the benefit of all your tax credits to date.

Sometimes tax is calculated using the Week 1 basis. This means that each pay day is dealt with on its own, separate from previous weeks. Income and tax credits are not accumulated from 1 January.

  • Example 1

    John is a Pay As You Earn (PAYE) employee. He is single.

    John's tax credits and rate bands for 2024
    CreditValue
    Single Person's Tax Credit €1,875
    Employee Tax Credit €1,875
    Total tax credits €3,750  (€72.12 per week)

    Because John is single, his rate band is €42,000 per year. The weekly amount is €807.70 (€42,000/52).

    John was given a TCC showing these tax credits and rate band. A Revenue Payroll Notification (RPN) was made available to his employer with the total amounts.

    John earns €300 per week. The standard rate of 20% is applied to his income up to the limit of the rate band (€807.70).

    As John’s income is less than his rate band, he does not pay tax at the higher rate of 40% this week.

    How John's weekly tax is calculated
    Description Income Gross tax
    Taxed at standard rate €350 x 20% €70.00
    Taxed at higher rate €0 €0
    Gross tax   €70.00
    Deduct tax credits   €72.12
    Tax payable   €0

    As John's tax credits are more than his gross tax, he does not pay tax this week.

  • Example 2

    Ruth is a PAYE employee and is paid monthly. She is single.   

    Ruth´s tax credits and rate bands for 2024
     Credit  Value
     Single Person's Tax Credit €1,875
     Employee Tax Credit  €1,875
     Total tax credits  €3,750 (€312.50 per month)

    Because Ruth is single, her rate band is €42,000 per year. The monthly amount is €3,500 (€42,000/12).

    Ruth was given a TCC showing these tax credits and rate band. A Revenue Payroll Notification (RPN) was made available to her employer with the total amounts. Ruth earns €3,600 per month.

    Her monthly tax is calculated by applying the standard rate of tax (20%) to the first €3,500 (up to the limit of Ruth's rate band). The higher rate of tax (40%) is applied to the last €100 (€3,600-€3,500) of her income above the rate band.

    How Ruth's monthly tax is calculated
     Description  Income  Gross Tax
     Taxed at standard rate  €3,500 x 20%  €700
     Taxed at higher rate  €100 x 40%  €40
     Gross tax  -  €740
     Deduct tax credits  -  €312.50
     Tax payable  -  €427.50
  • Example 3

    Sarah is a PAYE employee. She is married and is taxed under joint assessment. Her husband, David, is not employed outside the home. They have a dependent child. Sarah is entitled to claim the Home Carer Tax Credit.

    Sarah's tax credits for 2024
    CreditValue
    Married Person’s Tax Credit €3,750
    Employee Tax Credit €1,875
    Home Carer Tax Credit €1,800
    Total tax credits €7,425 per year (€142.79 per week)

    Because Sarah is married, and her husband does not have an income, her rate band is €51,000 per year. The weekly amount is €980.77 (€51,000/52).

    Sarah was given a TCC showing these tax credits and rate band. A Revenue Payroll Notification (RPN) was made available to her employer with the total amounts.

    Sarah earns €1,100 per week. Her weekly tax is calculated by applying the standard rate of tax (20%) to the first €980.77 (up to the limit of Sarah's rate band).

    The higher rate of tax (40%) is applied to the last €119.23 (€1,100 – €980.77) of her income above the rate band.

    How Sarah's weekly tax is calculated
     Description Income Tax
    Taxed at standard rate €980.77 x 20% €196.15
    Taxed at higher rate €119.23 x 40% €47.70
    Gross tax   €243.85
    Deduct tax credits   €142.79
    Tax payable   €101.06
  • Example 4

    Paul and Gerard are PAYE employees. They are civil partners and taxed under joint assessment. Paul earns €52,000 and Gerard earns €20,800 per year.

    Paul and Gerard's tax credits for 2024
    CreditsValue
    Civil Partner Tax Credit €3,750
    Employee Tax Credit (Paul) €1,875
    Employee Tax Credit (Gerard) €1,875
    Total tax credits €7,500 per year 

    The standard rate band for couples in a marriage or civil partnership for 2024 is €51,000, where only one person is working. Because both Paul and Gerard are working, they are due the increased rate band.

    The rate band is increased by the income of the lower earner, up to a maximum amount of €33,000. Their rate band is €71,800 (€51,000 + €20,800).

    As Paul earns more than Gerard, they have chosen to divide their tax credits and rate band. 

    Paul's tax credits and rate band
     Description AmountAmount per week
    Civil Partner Tax credit €3,750 €72.12
    Employee Tax Credit €1,875 €36.06
    Rate band €51,000 €980.77
    Gerard's tax credits and rate bands
     Description  Amount  Amount per week
     Employee Tax Credit  €1,875  €36.06
     Rate band  €20,800  €400.00

    Paul and Gerard were given TCCs showing these tax credits and rate bands.  Revenue Payroll Notifications (RPNs) were made available to their employers with the total amounts.

    Paul earns €1,000 per week. His weekly tax is calculated by applying the standard rate of tax (20%) to the limit of his rate band.

    How Paul’s weekly tax is calculated
     Description CalculationAmount
    Limit of rate band taxed at standard rate €980.77 x 20% €196.15
    Balance (€1,000 - €980.77) taxed at higher rate €19.23 x 40% €7.69
    Gross tax   €203.84
    Deduct tax credits   €108.18
    Tax payable   €95.66

    Gerard earns €400 per week. His weekly tax is calculated by applying the standard rate of 20%, up to the limit of the rate band. As Gerard’s income is lower than his rate band, he does not pay tax at the higher rate of 40% this week.

    How Gerard’s weekly tax is calculated
     Description IncomeTax
    Taxed at standard rate €400.00 x 20% €80.00
    Gross tax   €80.00
    Deduct tax credits   €36.06
    Tax payable   €43.94

Next: What is the difference between gross and taxable pay?

Published: 01 January 2024 Print this page

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