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Employment tax credits and reliefs

Introduction

The amount of tax you pay depends on your income. You can find out more about how your income tax is calculated. Income tax reliefs reduce the amount of tax that you have to pay. Here are some of the tax reliefs that relate to employment.

PAYE Tax Credit

If you are in employment, tax on your income is deducted by your employer on behalf of the Revenue Commissioners. This system of deduction is known as the Pay As You Earn (PAYE) system. All PAYE taxpayers are entitled to a tax credit known as the PAYE Tax Credit. This is worth €1,650 in 2017. If you are married and taxed under joint assessment, then you and your spouse may both claim a PAYE Tax Credit.

Benefits from employment

In Ireland, most benefits from employment that are provided in addition to pay are subject to income tax. This also applies to benefits-in-kind. Benefits-in-kind are benefits received by an employee that cannot be converted into cash but that have a cash value. Examples include provision of a company car, loans given at a special rate or provision of accommodation. Some benefits-in-kind are exempt from tax or can be received tax efficiently. You can find information on benefits-in-kind and how they are taxed.

If you are teleworking, that is, using a computer to work from home, your employer may provide you with a computer, printer or other equipment. In this case, the equipment provided is not assessed for tax as a benefit-in-kind so long as it is used primarily for business use. If your employer provides expenses to cover costs such as heating and light, these can be paid without being taxed. See Revenue's website for more information on working from home.

Expenses

Some work expenses can be deducted from your income before it is assessed for tax. To qualify, the expenses must have been necessary in order to do your work and must have been spent entirely for that purpose and no other.

A mileage allowance that you receive for the use of your car for business purposes is not taxable if it does not exceed the civil service mileage rates.

There is no tax relief on expenses for getting to or from work.

The Cycle to Work Scheme is a tax incentive scheme which aims to encourage employees to cycle to and from work. Under the scheme employers can pay for bicycles and bicycle equipment for their employees and the employee pays back through a salary sacrifice arrangement of up to 12 months. The employee is not liable for tax, PRSI or the Universal Social Charge on their repayments.

See Revenue for more details on expenses that can be deducted for tax purposes including flat-rate expenses. Flat-rate expenses are directly related to the nature of the employment. A standard flat rate expenses allowance (deduction) xls is set for various classes of employee. The agreed deduction is then applied to all employees of the class or group in question.

Pension contributions

Contributions to a pension are eligible for tax relief. Find out more about occupational pensions, personal pensions, and Personal Retirement Savings Accounts (PRSAs).

Cross-border workers

If you are resident in Ireland and commute daily or weekly to your place of work in another country where you pay tax, then you may qualify for Trans-border Workers Relief. This reduces your tax in Ireland to take account of the tax that you have paid abroad. It does this by reducing the tax you pay in Ireland on your total income so that it is in proportion to the amount of income from Irish sources.

For example, take the case where your total income was €50,000, of which €5,000 was earned in Ireland and the remainder (€45,000) was earned and taxed abroad.

The proportion of your total income that is Irish income is 1/10 (5,000 divided by 50,000).

Your Irish income tax liability is calculated as usual on the full amount of your income, €50,000 .

But under Trans-border Workers Relief, this amount of tax is then divided by ten to give the tax that you have to pay in Ireland.

There are certain conditions on the duration and place of employment. More information on Trans-border Workers Relief is available (pdf).

Seafarer's Allowance

If you are employed on board a ship and spend at least 161 days in a calendar year at sea travelling to or from foreign ports, then you may qualify for Seafarer's Allowance. The allowance is €6,350 and it is an allowance available at your highest rate of tax.

Fisher Tax Credit

A new Fisher Tax Credit was introduced in Budget 2017 to assist the viability of the fishing sector. If you have fished on a registered fishing vessel for at least 80 days in a tax year you can claim an income tax credit of €1,270 per annum.

The tax credit is for the years 2017 to 2021 and is calculated at 20% of your fishing income.

It is not available to fish farmers. If you claim this credit you cannot also avail of the Seafarer's Allowance in the same tax year.

More information is available on the Seafarer's Allowance and Fisher Tax Credit on revenue.ie.

Page edited: 12 July 2017

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