How PAYE works
As an employee in Ireland, you do not calculate or pay your own income tax. Your employer does it for you through the PAYE system. Each time you are paid — weekly, fortnightly, or monthly — your employer deducts the correct amount of tax and sends it directly to Revenue.
Revenue tells your employer how much tax to deduct by issuing a Revenue Payroll Notification (RPN). This document contains your tax credits and rate band, which your employer uses to calculate your deductions. You can view your own RPN at any time by logging into myAccount on Revenue.ie.
What is the difference between PAYE, USC, and PRSI?
PAYE, USC, and PRSI are all deductions that may appear on your Irish payslip, but they each serve different purposes.
| Deduction | What it is | What the money is used for |
|---|---|---|
| PAYE | Income tax | General government spending and public services |
| USC | Universal Social Charge | Additional state funding for public finances and services |
| PRSI | Social insurance contribution | Benefits such as the State Pension, Jobseeker’s Benefit, and Illness Benefit |
You can learn more in our detailed guides to PAYE, USC, and PRSI.
Income tax rates in 2026
Ireland has two income tax rates. The rate you pay depends on how much you earn.
| Income | Tax rate |
|---|---|
| Up to €44,000 (single person) | 20% |
| Everything above €44,000 | 40% |
Source: Revenue.ie — Tax rates, bands and reliefs 2026 ↗
The €44,000 threshold is called your standard rate cut-off point. Income below this is taxed at 20% (the standard rate). Income above it is taxed at 40% (the higher rate).
How tax credits reduce what you pay
Tax credits directly reduce the amount of income tax you owe. They are not deductions from your income — they are deductions from your tax bill itself.
Most PAYE workers in Ireland usually have at least two tax credits applied automatically:
| Tax credit | Amount (2026) |
|---|---|
| Personal tax credit | €2,000 |
| Employee (PAYE) tax credit | €2,000 |
| Total standard credits | €4,000 |
Source: Revenue.ie — Tax credits 2026 ↗
This means €4,000 is taken off your gross tax bill every year. Other credits may apply depending on your circumstances — for example, the Single Person Child Carer Credit or the Home Carer Tax Credit.
Worked example
Here is how PAYE income tax is calculated for a single person earning €40,000 per year in 2026.
| Step | Calculation | Amount |
|---|---|---|
| Full income taxed at 20% | €40,000 × 20% | €8,000 |
| Nothing above standard rate band | €0 × 40% | €0 |
| Gross tax | €8,000 | |
| Less: Personal tax credit | −€2,000 | €2,000 |
| Less: Employee (PAYE) tax credit | −€2,000 | €2,000 |
| Income tax due | €4,000 | |
This is an example only. Your tax will depend on your exact income, credits, and circumstances. Calculation based on Revenue.ie income tax calculation method ↗
What this means in real life
For an employee, PAYE is the income tax amount deducted through payroll before wages reach the bank account. The employer uses Revenue's payroll instructions, including tax credits, rate bands and tax basis, rather than choosing the deduction independently. A new job, second employment, missing credits or emergency basis can therefore change PAYE even when the hourly rate or salary stays the same. PAYE is only one part of the movement from gross to net pay; USC, PRSI, pension contributions and other deductions are calculated separately. At year end, Revenue can compare income tax paid with the final annual position. The tax credits guide explains how credits reduce PAYE, while the payslip guide shows where the deduction appears.