If you follow us on Facebook, you will have seen many posts that say healthcare assistants can expect to pay less than 5% in taxes, and many people have sent us messages asking how this is possible. Many tell us that they have done the research, and the tax rate is 20% and not 5%.
So in this blog, we are going to explain how the Irish Tax System works.
The Irish tax system is different from most EU countries and works on a tax credit system.
When you first register your employment in Ireland, you will be issued a Tax Credit Certificate, which can differ based on your circumstances.
For example, a single person who is renting will receive a tax credit of € €4,050, whereas a single parent or a married person with just one person working will receive a tax credit of €5,200.
In the example below, if you were a single parent earning 25,000 per annum, your tax rate would be 0%, this is because your tax bill would be €5,000, but your Tax Credit would be €5,200, meaning you would owe no tax during the year.
Once they have established your tax credit, this will be divided by the number of times you will be paid in the current tax year.
So, for example, if you get paid monthly and start your new position in Ireland at the beginning of April, you will receive nine paycheques in the current tax year. So, your tax credit of €4,050 will be divided by 9, resulting in a monthly credit of €450
When your monthly tax is calculated, €450 will be deducted from your tax bill, and the remainder is what you will owe.
Below is an example of a tax calculation for a single person earning €25,000 per annum, starting work in Ireland at the beginning of the tax year for the first time and being paid monthly.
Your 2023 income tax
| 2023 | |
| Annual salary | €25,000 |
| Gross income | €25,000 |
| Tax payable | €25,000 @ 20% €5,000 |
| €0 @ 40% €0 | |
| Total tax liability | €5,000 |
| Personal tax credits (less) | – €4,050 |
| Net tax due | €950 |
| PRSI | €1,000 |
| Universal social charge | €372 |
| Total deductions | €2,322 |
| Annual disposable income | €22,678 |
| Monthly disposable income | €1,890 |
Based on the above example of a single person earning €25,000 per annum, the actual tax paid each month would effectively be 3.8%, and total deductions, including your health cover, would be 9.2%. Resulting in take-home pay after all deductions of €1,890 per month, and with a little overtime, you could take this over €2,000 per month easily.
