Tax credits reduce the amount of tax that you have to pay.

After your tax is calculated, as a percentage of your income, the tax credit is deducted to reduce the amount of tax that you have to pay. So a tax credit of €200, for example, will reduce your tax by that amount.

Tax credits are non-refundable. However, any unused tax credits in a pay week or month are carried forward to subsequent pay period(s) within the tax year.

The type of tax credits you may qualify for depends on your personal circumstances, for example;  if you work, are married, have dependents, if you rent a home, are in education, pay pension premiums or are a widowed parent. There are many other tax reliefs available so it’s a good idea to ask a tax advisor to review your exact situation.

For further information please visit the Tax Credits section on the Irish Revenue website.

Cross-border issues

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 PKFPM 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 “trans-border” worker 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.

Taxation FAQ

I am a cross border worker, living North and working South. I was married earlier this year and applied to Irish Revenue for Married Persons Tax Credit, however I was informed that I would continue to be taxed as a Single Person. Why was Married Persons Tax Credit not awarded to me?

A: In the year of marriage for tax purposes, both spouses continue to be treated as two single people and on this basis Revenue will not allocate you with the married persons credit that year.  However if the tax you pay as two single persons in that year is greater than the tax which would be payable as a couple in a marriage then a refund of the difference can be claimed.  Refund will be apportioned from the date of marriage to the year end.

For subsequent years Revenue guidelines on the tax treatment of non-resident spouses working in Ireland advises that:

• The married persons tax credit will be allocated where the other spouse has no other source of income; or
• If the other spouse has a source of income, then the spouse working in Ireland will be taxed as a single person under Separate Treatment and at the year-end can submit an election to Revenue to make a request for aggregation purposes.

It is however important to note that as a resident of N.I. in most cases you are required to submit a UK tax return each year declaring your worldwide income.  The UK does not have an equivalent married couples credit and therefore all UK taxpayers are taxed as single individuals.  Where the married persons tax credit in Ireland is provided to you, lesser tax will obviously be payable in Ireland but once taxed under UK rules, could result in an increased balance of tax due in the UK.

See other Taxation FAQs

See also:

• Citizens Information – Introduction to income tax credits and reliefs

Please use this information as general guidance only. Cross-border taxation can be complex and every situation is different. A quick conversation with a trained tax expert or accountant can keep you on the right path.

[Page last checked: Oct 2021]

This webpage is for general information purposes only and while we endeavour to keep it up-to-date, errors may occur. It is very important that you check with the relevant body to ensure the information is current and is applicable to your situation.

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