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Tax and starting work - PAYE

Introduction

Most employees pay tax through the PAYE (Pay As You Earn) system. This means that your employer deducts the tax you owe directly from your wages, and pays this tax directly to Revenue. Revenue collect taxes from citizens on behalf of the Irish Government.

You will also pay PRSI and the Universal Social Charge on your income.

Starting work

It is important to ensure that your tax is dealt with properly from the start and that your new employer deducts the right amount of tax from your pay. To ensure that this happens, you will need to do two things:

  • Give your employer your PPS Number. This number is your unique personal identification number for public services. Your employer will then let your tax office know that you have started work and that they are your employers. Read more about how to obtain a PPS No. under 'How to apply' below.
  • Apply for a certificate of tax credits. You will need to complete an application form to do this. It is called Form 12A Application for a Tax Credit Certificate (pdf) - see 'How to apply' below.

To ensure that your employer and the tax office have time to have everything sorted out before your first payday, it is advisable to do all this as soon as you accept an offer of a job (even for part-time or holiday employment). Your own personal circumstances dictate the amount of tax credits you are entitled to. The tax office will then forward you a detailed statement of your tax credits. Your employer will also be notified of your tax credits.

Tax credits

Tax credits reduce the amount of income tax that you have to pay. Your gross tax is calculated depending on your income. Tax credits are then deducted from the gross tax to give the amount of tax that you have to pay.

Tax credits consist of various credits and reliefs which you may be able to claim, depending on your circumstances. Every individual can claim a personal tax credit for example, and you can also claim relief for items such as the One Parent Family Credit. If you are a PAYE taxpayer, each year you can request a tax credit certificate from Revenue. If you are registered with Revenue's PAYE Anytime service you can view your tax credit certificate online. Your tax credit certificate will show the tax credits that your employer is deducting from your tax bill.

Details of all the main tax allowances and reliefs are given on the explanatory leaflet available from your tax office or online from revenue.ie.

What do I have to pay tax on?

Tax is payable on earnings of all kinds that result from your employment (including for example, bonuses, overtime, non-cash pay or benefit-in-kind such as the use of company car, tips or Christmas boxes. You do not pay tax on: scholarship income, interest from savings certificates, savings bonds and national instalment savings schemes, and payments to approved pension schemes.

Pay that you receive through working extra hours (overtime) or bonuses, is included as part of your taxable pay for that week or month. You do not get any additional tax-free allowances against these additional earnings.

Emergency tax

If your employer has not received either a:

  • Certificate of tax credits from the tax office or,
  • Form P45 (parts 2 and 3) from you, in respect of your previous employment,

your employer will be obliged to deduct tax on an emergency basis when paying your wages or salary. This means that they will give you a temporary tax credit for the first month of employment but tax deductions are increased progressively from the second month onwards. The effect of emergency basis is that after 4 weeks no tax credits are given, and tax is paid at the higher rate from week 9, regardless of the level of pay. It makes sense therefore to avoid the emergency basis by following the simple steps outlined earlier when you start work. Details of emergency tax rates are available on the Revenue website.

Income tax bands

Income tax bands will determine the rate of tax you pay on your income or salary. Read more about how your tax is calculated here.

More detailed information regarding tax credits and reliefs is available from your local tax office.

Starting a second job

If you choose to take on a second job, your first employer will already have instructions from the tax office to give you all the tax credits to which you are entitled against your pay. Unless you advise your District Tax Office to issue new certificates, one to each employer, dividing the tax credits and standard rate cut-off point between the two jobs, your new employer (that is, in your second job) will operate your pay on an emergency tax basis.

This will mean that you would get more tax credits than you are entitled to, resulting in an underpayment of tax, which will have to be paid at the end of the tax year. Contact the Revenue's Lo-call PAYE enquiry service (see 'How to apply' below) for contact details of your District Tax Office.

How to apply

If your employer does not have the application form 12A you can get one from the Lo-call PAYE enquiry service. Ask your employer which tax office your completed form should be sent to.

Further information about how to apply for a Personal Public Service Number (PPS Number) is available here.

You can read these Frequently Asked Questions about tax and starting work and this Revenue leaflet, First Job - a guide for first time entrants to the PAYE Tax System.

Page updated: 23 March 2015

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Contact Us

If you have a question relating to this topic you can contact the Citizens Information Phone Service on 0761 07 4000 (Monday to Friday, 9am to 8pm) or you can visit your local Citizens Information Centre.