How PAYE works in Ireland
The standard rate band, the two rates, and what tax credits actually do.
PAYE — Pay As You Earn — is how income tax reaches Revenue from an employee in Ireland. Your employer works out the tax on each payslip and sends it on. You never handle the money, which is convenient and also why so few people can explain what happened to it.
Two rates, one dividing line
Irish income tax has only two rates: 20% and 40%. The dividing line between them is your standard rate cut-off point, usually called the standard rate band. Income up to that point is taxed at 20%; everything above it is taxed at 40%.
For 2026 the band is €44,000 for a single person, €48,000 for a single parent with a qualifying child, and €53,000 for a married couple or civil partners with one income. Where both partners earn, the €53,000 can be increased by up to €35,000 — but only by as much as the lower earner actually earns.
Then credits come off the tax
Tax credits are the step most people get backwards. They do not reduce your income — they reduce the tax itself, euro for euro, after the rates have been applied.
Almost every employee has two: the Personal Tax Credit (€2,000 for a single person in 2026) and the Employee Tax Credit, also called the PAYE credit (another €2,000). Together that is €4,000 of income tax wiped out before you pay anything.
Credits are not refundable. If your credits are worth more than your tax, your income tax is zero and the difference is not paid to you.
A worked example
A single person earning €50,000 in 2026: the first €44,000 is taxed at 20% (€8,800) and the remaining €6,000 at 40% (€2,400), giving €11,200 of gross tax. Subtract €4,000 of credits and the income tax is €7,200 for the year.
That is only the income tax. USC and PRSI are separate charges with their own rules, and they are what turn €7,200 into a much larger total deduction.
Why your payslip does not match
Most employees are taxed on a cumulative basis. Each payslip looks at your income and credits for the year so far, not just that period, so a quiet week can produce a refund and a busy one a larger deduction. Over a full year it evens out.
If your employer has no instruction from Revenue for you — common in a new job — you may be on emergency tax, where little or no credit is applied and the deduction is high. Registering the job in Revenue myAccount normally fixes it, and the overpayment comes back.