# Case study: Calculating your income tax

## Introduction

These examples demonstrate how your tax is calculated in 2024 and how tax credits reduce the amount of tax you have to pay.

## Tax credits

Joan is single and earns €28,000 a year. She gets her tax credit certificate from Revenue.

Joan’s tax credits are listed as:

• Single Person Tax Credit = €1,875
• Employee (PAYE) Tax Credit = €1,875
Tax credit total = €3,750

The standard rate cut-off point for a single person is €42,000. Because Joan’s income is below the cut-off point, all of her income is taxed at the standard rate, (20%), to give her gross tax.
28,000 x 20% = €5,600 gross tax.

All her tax credits are deducted from the gross tax to give the tax that is payable:
€5,600 - €3,750 = €1,850

Joan is also liable to pay the Universal Social Charge (USC).

USC = €424.62. This is calculated as follows:

• A rate of 0.5% on the first €12,012 (which comes to €60.06)
• 2% on the next €13,748 (which comes to €274.96)
• 4% on the balance of €2,240 (which comes to €89.60)

The total amount deducted from her annual income is:

€1,850 (income tax) + €424.62 (USC) = €2,274.62

You can get the monthly amount of the total tax that should be deducted from wages by dividing this annual figure by 12.

Or, you can get the weekly amount of the total tax that should be deducted from wages by dividing the annual figure by 52.

## Tax rates and the standard rate cut-off point

A single taxpayer who earns €43,200 a year will have their tax calculated as follows:

The standard rate band for a single taxpayer is €42,000.

This means that the first €42,000 is taxed at the standard rate of tax, 20%, and the remainder (€1,200) is taxed at the higher rate of tax, 40%.
€42,000 x 20% = €8,400
€1,200 x 40% = €480
Total gross tax = €8,880

Tax credits are deducted from this amount to give the tax due. A single PAYE (Pay As You Earn) taxpayer is entitled to

• Single Person Tax Credit = €1,875
• Employee (PAYE) Tax Credit = €1,875
Total tax credits = €3,750

In this example, the taxpayer is not entitled to any other tax credits.

Subtract the total tax credits to get the income tax due:

Gross tax of €8,880

Minus tax credits of €3,750
Tax due = €5,130

The Universal Social Charge (USC) is also payable on the gross income.

USC is calculated as follows:

• A rate of 0.5% on the first €12,012 (which comes to €60.06)
• 2% on the next €13,748 (which comes to €274.96)
• 4% on the balance of €17,440 (which comes to €697.60)

USC = €1,032.62

The total amount deducted from income in the year is:

€5,130 (income tax) + €1,032.62 (USC) = €6,162.62

## Tax allowances

Tax allowances also reduce the amount of tax you have to pay. The amount a tax allowance reduces your tax by depends on how much income tax you pay at the highest rate of tax. This is because the allowance is subtracted from your income before tax is calculated.

Page edited: 8 January 2024