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Employment Income Tax and PAYE in Ireland

1. What counts as employment income?

Taxable employment income includes:

  • Salary and wages
  • Overtime, bonuses, commission
  • Allowances (for example, car, travel, subsistence – unless qualifying as tax‑free)
  • Benefits in kind (BIK) – non‑cash benefits, such as:
    • Use of a company car
    • Employer‑provided accommodation
    • Low‑interest or interest‑free loans
    • Certain vouchers or gifts above small limits
  • Certain share‑based rewards, such as shares or options (treatment depends on scheme type)

Most of this is subject to Income Tax, USC and PRSI.

2. How tax is collected – PAYE

For employees, tax is collected under PAYE (Pay As You Earn):

1. Revenue gives you a Tax Credit Certificate (and your employer a Revenue Payroll Notification) showing:

  • Your standard rate band (20% band)
  • Your tax credits

2. Each pay period your employer:

  • Calculates tax:
    • 20% on income within your band
    • 40% on income above it
  • Deducts:
    • Income tax
    • USC
    • PRSI

3. Your net pay is paid to you after these deductions.

If your circumstances change (new job, additional job, marriage, etc.), your PAYE details should be updated via Revenue, usually in myAccount.

3. Tax credits relevant to employment income

Common credits reducing the tax on employment income:

  • Personal tax credit – €2,000 (single), €4,000 (married/civil partners, joint)
  • Employee (PAYE) tax credit – €2,000 (for income taxed via PAYE)
  • Single Person Child Carer Credit – €1,900 (if conditions met)
  • Blind Person Credit – €1,950 (more if both spouses/civil partners are blind)
  • Incapacitated Child Credit – €3,800 per qualifying child

Credits cannot create a repayment of more than the tax actually charged; they reduce the income tax, not USC or PRSI.

4. Benefits in kind (BIK)

Where an employer provides non‑cash benefits, the cash equivalent is usually treated as taxable pay:

  • Company car – benefit based broadly on Original Market Value and business mileage
  • Accommodation – market value rent or a calculated value
  • Loans – benefit based on difference between market interest and interest actually paid
  • Other benefits – gym membership, certain subscriptions, etc., unless specifically exempt

BIK is normally taxed through payroll like salary.

Some items are exempt or partly exempt, for example:

  • Small benefit exemption – limited value voucher(s)/gift(s) per year, within strict rules
  • Certain travel and subsistence reimbursements where Revenue rules are followed
  • Some work‑related training costs

5. Expenses and reimbursements

An employee can only get tax relief for “wholly, exclusively and necessarily” incurred employment expenses. In practice:

  • Routine travel to and from work is not allowable.
  • Genuine business travel, tools, or professional subscriptions required by the job may be allowable.
  • Often, employers reimburse allowable expenses tax‑free if they follow Revenue guidelines; otherwise, you may claim relief from Revenue directly.

6. Share schemes and share‑based pay (very high‑level)

Different rules apply depending on the scheme:

  • Approved profit‑sharing schemes / share participation schemes – often more favourable tax treatment.
  • Unapproved share options – typically income tax, USC and PRSI on the gain when options are exercised; employees may have to self‑assess and pay within specific deadlines.
  • Restricted shares, RSUs, etc. – specific timing and valuation rules.

Because the rules are complex, employees receiving shares or options often need tailored advice.

7. End of year – employees

At year end, most PAYE employees should:

  • Review their position through Revenue myAccount.
  • Claim any unclaimed credits or expenses (for example, medical expenses, some employment expenses).
  • Ensure they have been taxed correctly if they:
    • Had more than one job,
    • Started or finished employment during the year,
    • Received taxable benefits or share‑based rewards,
    • Became married or civil partners.

This can result in a refund or, occasionally, an underpayment to be collected by Revenue.

If you tell Ezylia your rough situation (employee only, or employee plus other income, benefits, etc.), a tailored, short example calculation for your employment income can be outlined.

Speak to Professional Tax Advisers

To discover more about Income Tax in Ireland, please call us on +353 (0)1 272 3858 or complete a Free Online Enquiry.