The PAYE System for all Pay As You Earn Workers Explained

The PAYE System for all PAYE workers in Ireland is explained in detail using simple terms in this video. Employment income is collected through the PAYE system. Statutory and Non-Statutory Deductions are deducted from employment income. Statutory Deductions are deductions that the employer by law must deduct from an employee’s pay. There are three* statutory deductions:
Income Tax
PRSI (Pay Related Social Insurance)
USC (Universal Social Charge)
*Revenue, in some instances, may also instruct an employer to deduct Local Property Tax (LPT) from an employee’s pay.
Non-are deductions that the employee voluntarily asks their employer to deduct from their pay. Non-statutory deductions can include:
Trade union subscription
Health insurance
Private pension payments
When calculating Income Tax, there are three main factors to consider:
Tax Basis
Tax Rate Band
Tax Credits
Your taxes may be collected using one of three tax basis:
1. Emergency Tax: Your job is not registered with Revenue or
You haven’t given your employer your PPSN.
Emergency tax may result in employees paying a higher amount of tax temporarily.
2. Week 1 Basis
Each pay slip is calculated separately.
Unused credits or rate bands from a previous pay slip are not carried forward.
3. Cumulative Basis
Your credits and rate bands are accumulated from 1st January to the current date. This is the preferred basis or often referred to as normal.

In Ireland, employees pay Income Tax on the income they earn from employment, e.g. wages, salary, bonus.
The amount of Income Tax to be paid depends on how much a person earns and their personal circumstances.
The current Income Tax rates are:
20% - Standard Rate
40% - Marginal Rate.


A tax rate band is the amount of income that will be taxed at a particular percentage (tax rate).
Based on the National Budget, the Revenue Commissioners publishes the current Income Tax rate bands.
These tax rate bands show people how much Income Tax they will pay on their income based on their personal circumstances.

Tax Credits
Tax credits reduce the amount of Income Tax a person pays
Gross Tax – Tax Credits = Net Tax (actual amount of tax to be paid)
The amount of tax credits a person receives depends on their personal circumstances including: Personal Status, Dependents, Age
and Health.
Tax credits are given for the entire tax year.
Unused credits cannot be carried forward to the next tax year.
Examples of tax credits include:
Single Person Tax Credit
Married Person / Civil Partner (without children)
Employee PAYE Tax Credit
Widowed Person / Surviving Civil Partner. #ireland #PAYESystem #incometaxcalculation #incometaxcredit #incometax #payrollmatters #payrollmattersinireland