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Income Tax in Northern Ireland

HM Revenue & Customs (HMRC) collects tax to pay for public services in Northern Ireland.

The tax year in Northern Ireland runs from 6th April to 5th April of the following year.

Income tax and National Insurance contributions (NICs) are 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.  Self-employed individuals are responsible for paying their own tax through the Self Assessment system

Income Tax on earnings, pensions and benefits

Income Tax is payable on:

  • your wages if you’re employed
  • the profits from your business if you’re self-employed
  • your State Pension and any private pensions
  • some benefits

How it works

Once your income tax liability is assessed by HMRC you are issued with a tax code which is used by your employer to determine the amount of income tax deducted directly from your wages (deducted at source).

If you are self-employed you will be responsible for paying your own tax and NICs and submitting annual Self-Assessment tax returns. You can find detailed information in the Self Assessment section on the HM Revenue and Customs website.

The tax system operates on a sliding scale, similar to the Republic of Ireland. The more you earn, the higher the amount of tax you pay.  The amount of National Insurance contributions you pay also depends on how much you earn.

For further information please visit Income Tax section on the HMRC website.

Frontier workers

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.

Example by PKF FPM Chartered Accountants

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. 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)

See also

Updated:  September 2017