What PAYE is and how it works
PAYE stands for Pay As You Earn. Revenue calculates your annual tax liability in advance, divides it proportionally across your pay periods, and your employer deducts it from your gross pay before you receive anything.
The idea is to prevent large year-end tax bills for employees. Instead of saving up to pay a lump sum in January, you pay steadily throughout the year and the calculation is (mostly) handled for you.
Your employer receives a Revenue Payroll Notification (RPN) at the start of the year and again whenever your details change. The RPN tells them exactly how much to deduct each pay period. As long as your credits and details are up to date with Revenue, your payslip should be accurate.
Most single-employer PAYE workers end up slightly overpaying through the year and receive a small refund in January after Revenue's end-of-year review.
The three deductions on every Irish payslip
Three separate charges come off a PAYE payslip. They're calculated differently and fund different things.
Income Tax
Two rates: 20% (standard) and 40% (higher). For a single person in 2025, the first €42,000 is taxed at 20%, the rest at 40%. Tax credits (see below) reduce your actual bill before you pay anything.
USC — Universal Social Charge
USC is a separate charge on gross income, calculated before any credits are applied. The 2025 bands for most workers:
| Income band | USC rate | |-------------|---------| | Up to €12,012 | 0.5% | | €12,013 to €25,760 | 2% | | €25,761 to €70,044 | 4% | | Above €70,044 | 8% |
Reduced rates apply to workers aged 70 and over, and to medical card holders with income under €60,000. USC cannot be reduced by tax credits.
PRSI — Pay Related Social Insurance
Most employees pay Class A PRSI at 4% on all earnings above a weekly threshold. PRSI builds up your social insurance record, which determines your entitlement to Jobseeker's Benefit, Maternity Benefit, Illness Benefit, and ultimately the State Pension.
PRSI cannot be reduced by tax credits either. It's a straightforward 4% on your gross pay above the threshold.
The three payslip deductions at a glance
| Deduction | Rate | What it funds | Reduced by tax credits? |
|---|---|---|---|
| Income Tax | 20% / 40% | General government expenditure | Yes |
| USC | 0.5% to 8% (banded) | Health and social services | No |
| PRSI | 4% (Class A) | Social insurance (Jobseeker's, Maternity, State Pension) | No |
How tax credits reduce what you owe
Tax credits reduce your income tax bill directly — not your taxable income. A €500 credit means you pay €500 less tax. Credits have no effect on USC or PRSI.
Every PAYE employee gets two credits automatically, applied by your employer via the Revenue Payroll Notification:
- Personal Tax Credit — €1,875 per year
- Employee Tax Credit — €1,875 per year
Combined: €3,750 off your annual income tax bill. In practice this means roughly the first €18,750 of your earnings is tax-free (€3,750 credits ÷ 20% standard rate = €18,750 effectively untaxed).
Credits your employer does not apply automatically — you claim these yourself through myAccount:
- Rent Tax Credit — €1,000/year for private renters (€500 if sharing)
- Health Expenses — 20% of qualifying out-of-pocket medical costs
- Working From Home Relief — a portion of electricity, heating, and broadband costs
- Tuition Fees Relief — 20% on college fees above €3,000 per student
- Single Person Child Carer Credit — €1,750/year
How to check your credits and claim what you're owed
Log in to myaccount.revenue.ie → Manage Tax → Tax Credits and Reliefs.
You can see which credits are currently applied to your record, add new ones (rent tax credit, health expenses, working from home), and review previous years.
Credits from previous years can be claimed back up to 4 years. So in 2025 you can claim unclaimed credits from 2021, 2022, 2023, and 2024. If you've been renting for years and never claimed the rent tax credit, the back-claim can be significant — €1,000 per year, so up to €4,000 for the maximum four years.
Health expenses are worth checking. GP visits, consultants, dental (certain treatments), physiotherapy, and prescribed medication all qualify. Keep receipts or check with your GP or pharmacy for a summary.
End-of-year review and refunds
Revenue processes an end-of-year balancing statement each January for the previous tax year. For most single-employer PAYE workers, this results in a small overpayment — because credits are divided into equal instalments through the year, but income or employment history might have changed.
How to trigger your own review: Log in to myaccount.revenue.ie → Review Your Tax → select the year → submit. Revenue recalculates your liability based on your actual total income and credits for the year and pays any refund within 5 working days.
If you changed jobs mid-year, were unemployed for a period, or have any unclaimed credits, this review is worth doing. Revenue doesn't always automatically flag that you're owed a refund — you may need to request it.
PAYE and a side income
If you earn from freelance work, rental income, or any other source on top of your PAYE job, you need to declare it separately. The threshold matters:
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Under €5,000 in non-PAYE income: Declare it through myAccount using the eForm 12 (non-PAYE income declaration). Revenue will adjust your tax credits or issue a bill as appropriate.
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€5,000 or more in non-PAYE income: You need to register for self-assessment and file a Form 11 by 31 October each year (or mid-November for ROS filers).
Not declaring non-PAYE income is the most common tax mistake employed people make. Revenue cross-references rental income data from RTB, banking data for certain thresholds, and other sources. If you're not sure whether something is taxable, citizensinformation.ie has a plain-language guide, or ask an accountant — it's usually a one-hour consultation for a straightforward query.
PAYE credits and thresholds change every October Budget. I'll email you once when the Budget lands with what's changed.
Common questions about PAYE in Ireland
What does PAYE mean in Ireland?▾
PAYE stands for Pay As You Earn. It's the system by which Revenue calculates your annual tax liability and your employer deducts it from your pay in instalments throughout the year. The three deductions on every PAYE payslip are: income tax (20% or 40%), USC (0.5% to 8% depending on income band), and PRSI (4% for most employees).
What is the difference between USC and income tax?▾
Income tax (20% and 40% rates) can be reduced by your tax credits. USC (Universal Social Charge, charged at 0.5%–8% depending on income) cannot be reduced by credits — it applies to gross income regardless. PRSI (4%) is also unaffected by credits. On your payslip, all three appear as separate deductions.
How do I get a PAYE refund in Ireland?▾
Log into myaccount.revenue.ie → Review Your Tax → select the tax year → submit for review. Revenue calculates your actual liability for the full year versus what was deducted by your employer and refunds any overpayment. Typically paid within 5 working days. You can claim back up to 4 years.
What tax credits do PAYE workers get automatically?▾
Every PAYE employee in Ireland gets two credits applied automatically: the Personal Tax Credit (€1,875) and the Employee Tax Credit (€1,875). Together that's €3,750 off your annual income tax bill — which in practice makes roughly the first €18,750 of your income tax-free. Other credits (rent, health expenses, working from home) must be claimed through myAccount yourself.
What is a Revenue Payroll Notification (RPN)?▾
An RPN is the document Revenue sends to your employer that tells them how much tax, USC, and PRSI to deduct from your pay each period. It includes your tax credits and standard rate cut-off. If you start a new job and don't register it through myAccount quickly, Revenue can't send an RPN and your employer must apply emergency tax (highest rate, no credits). Register new jobs through myAccount → My Jobs and Pensions.