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Calculating your Income Tax

  1. Overview
  2. What are gross pay and taxable pay?
  3. What are tax credits?
  4. What is a tax rate band?
  5. What is an increased rate band?
  6. What is a Tax Credit Certificate?
  7. How your Income Tax is calculated

What is a tax rate band?

A tax rate band is the amount of income which will be taxed at a particular percentage (tax rate). The current tax rates are 20% and 40%. A portion of your income will be taxed at 20% and the remainder will be taxed at 40%.

Standard rate of tax

Your income up to a certain limit is taxed at the ‘standard rate’ of Income Tax, which is currently 20%. This is known as the standard rate band.

Higher rate of tax

Any income above your standard rate band is taxed at the higher rate of Income Tax, which is currently 40%.

What is your rate band?

The amount of your tax rate band is dependent on your personal circumstances. For example, whether you are:

You can find a list of the tax rate bands, for this year and the previous four years, in the Tax rates, bands and reliefs chart.

How rate bands work

If you are an employee, then your tax rate band will be shown on your Tax Credit Certificate. Your employer will use this to calculate the amount of tax to deduct from your weekly or monthly pay.

Under the Pay As You Earn (PAYE) system, tax rate bands are spread evenly throughout the year. If you are working for the full year, depending on how often you get paid your tax rate bands will be divided as follows:

  • 52 equal weekly amounts
  • 12 equal monthly amounts.

If you have a second or multiple jobs, you can divide your rate band between them.

Unused rate bands

You cannot get a refund of any unused tax rate bands and you cannot carry them over into another tax year. 

  • Example

    In 2020, Ann is single and earns €750 per week.

    Because Ann is single she has a standard rate band of €35,300 per year. The weekly amount is €678.85 (€35,000/52).

    This means that the first €678.85 of Ann’s wages is taxed at the standard rate of 20%. The balance of €71.15 (€750 - €678.85) is taxed at the higher rate of 40%.

    Ann will also have tax credits, allowances and reliefs applied to her earnings.

  • Example 2

    In 2020 Colin is single and earns €370 per week.

    Because Colin is single he has a standard rate band is €35,300 per year. The weekly amount is €678.85 (€35,300/52).

    The standard rate of 20% is applied to his income up to the limit of the rate band (€678.85).

    Colin’s income is less than the limit of his standard rate band. He does not pay tax at the higher rate of 40%.

Next: What is an increased rate band?

Published: 10 January 2020 Print this page

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