In Ireland the tax year starts on 1st January and ends on 31st December each year.
Income tax and Pay Related Social Insurance (PRSI) is chargeable on all income earned by individuals in the tax year subject to certain exceptions and exemptions. An employee’s tax is deducted by their employer, through the Pay As You Earn (PAYE) system. If you are self-employed, or have income where some or all of the tax cannot be collected under the PAYE scheme you will be responsible for paying your own tax and submitting annual Self-Assessment tax returns.
How it works
As an employee your tax is taken from your pay by your employer. This is known as PAYE or Pay As You Earn. PAYE ensures that the yearly amount of tax that you have to pay is collected evenly throughout the year on each payday.
At the start of each year, Revenue sends your employer a notice that gives the necessary details needed to work out your correct tax. This notice includes any changes to tax that were made in the most recent Budget.
The details in the notice are based on the information about your personal circumstances that you gave to Revenue. When there is a change in your personal circumstances that affects the tax you pay; for example, if you get married, you need to tell Revenue. Revenue will then send your employer a new notice to calculate the new amount of tax you should be paying. A separate more detailed notice is sent to you.
If you are self-employed you will be responsible for paying your own tax and submitting annual Self-Assessment tax returns. You are also responsible for submitting annual Self-Assessment returns if you receive profits from rents, investment income, foreign income and foreign pensions, maintenance payments to separated persons, fees, profit arising on exercising various Share Options/Share Incentives,
The tax system operates on a sliding scale, similar to Northern Ireland. The more you earn, the higher the amount of tax you pay. The amount of PRSI you pay also depends on how much you earn.
The Revenue Commissioner website provides helpful information and a simple guide to the Irish tax system. It provides step by step guidelines on how to register for tax while also providing information on aspects of the tax system. For further information please visit the Personal Tax section of the Revenue: Irish Tax and Customs website
As a frontier worker you must pay income tax in the country where you earn your income, but your ultimate tax responsibility is with the country where you live so you must submit an annual self assessment each year.
If you live in one jurisdiction and work in another you may potentially have income tax liability both where you live and where you work.
Southern residents working in the North
- Will pay tax directly to HMRC
- Will be required to submit an annual Self Assessment return to the Irish Revenue Commissioner
- Will be eligible for Trans-border Workers Relief. For further information please visit the Revenue: Irish Tax and Customs website – Trans-Border Workers Relief
The Universal Social Charge will be treated as a tax paid for the purposes of Article 2 of the UK/IRL Double Taxation treaty.
Northern residents working in the South
- Will pay tax directly to the Irish Revenue Commissioner
- Will be required to submit an annual Self Assessment on foreign earnings to HMRC
- Will be eligible for tax relief (based on Irish tax and USC paid) due to the Double Taxation Agreement between the UK and Ireland. For further information please visit HM Revenue & Customs website – foreign tax credit relief or telephone 0845 300 0627 or +44 135 535 9022
- May have a balance of UK tax to pay as Trans-border Workers Relief is not available for northern residents working South
Irish Tax Credits
Cross border workers, working in the South and living in the North, should be wary of using tax credits to reduce their Southern tax bill, as it could result in a higher top-up tax payment in the North.
A married person who lives in Armagh is employed by a company in Monaghan. They travel each day to Monaghan and back. They are run through Irish payroll by their employer in Monaghan. Every Irish employee gets certain tax credits in Ireland, usually a PAYE credit and a single or married tax credit.
For a UK resident, if they have a foreign employment, like this case, they must file a UK tax return and disclose this foreign income. When filing the UK tax return you take the sterling equivalent of the Irish employment income and take a double tax credit for the sterling equivalent of the Irish tax deducted. Given that the UK operates on an individual basis of taxation a shortfall of tax can arise in the UK in the event that the person has claimed, for example the married rather the single tax credits in Ireland.
Unlike Ireland, the UK doesn’t have the equivalent of a “transborder” relief, therefore if insufficient tax is deducted in Ireland, it can result in the UK resident having to make up the shortfall when filing their UK tax return. However, some UK residents (if married) working in Ireland may wish to claim the married credit and take advantage of the additional cash-flow and accept that they will need to repay the tax shortfall on filing the UK return the following January.
Cross border civil servants
Cross border civil servants (including teachers), living in the South and working in the North, may not need to submit an annual self-assessment, unless they have another source of Irish income, or if they are jointly assessed for Irish tax with a spouse.
Civil servants may not need to submit an annual self-assessment
Other sources of income may include (but not limited to) rental income, interest on savings or investments.
Contact your local tax office to confirm your situation. the Revenue: Irish Tax and Customs web page – Local tax offices (Border, Midlands, West region)