How to calculate income tax
Read our 5 steps below
Whether you are an employer or an employee, you should understand how income tax is calculated. To make this less daunting we have broken down how to calculate income tax into 5 steps. Also, for simplicity’s sake we won’t complicate things by covering Week 1, Cumulative basis, or PRSI and USC.
What is income tax?
Simply put, income tax is a tax on income that you earn from employment – it is deducted from your salary and paid to Revenue by your employer.
5 steps to calculate income tax:
- Find your rate band, tax credits, allowances and relief (click here).
- Apply 20% (the standard rate) to your income in your weekly, fortnightly or monthly (depending on your payment frequency) rate band.
- Apply 40% (the higher rate) to your income that is above your weekly, fortnightly or monthly (depending on your payment frequency) rate band.
- Add the two values.
- Calculate the value of your tax credits on a weekly, fortnightly or monthly basis (depending on your payment frequency) and subtract this value from the previous value.
And that’s it! It’s simple when you know how. Well, at least the basics are simple. Things can get a lot more complicated when you include all of the other aspects of payroll. Ensuring accuracy and compliance with the most up to date regulations can get difficult for many businesses and as a result more and more companies are opting to outsource their payroll to specialists.
For more on Irish Payroll Calculations read:
Paycheck Plus, Your Outsourced Payroll Provider
Paycheck Plus is an award-winning outsourced payroll provider, serving national and international businesses with industry-leading accuracy levels, strict levels of confidentiality and top-rated payroll processes. We provide comprehensive, ISO and ISAE 3402 accredited, payroll outsourcing services to organisations of all sizes.
Our highly experienced payroll processing experts can help you to navigate all aspects of local taxation and help you meet your legal requirements. Our services include international payroll processing, payroll consultancy, payroll audits, payroll reporting, payroll training, and much more.
To ensure payroll accuracy or for more information simply request a quote or call our Irish payroll company on +353 (0) 1 905 9400
Laura joined our Payroll Outsourcing Service after obtaining an honours bachelor’s degree in business. She joined the Paycheck Plus Graduate Programme as a Trainee Payroll Specialist where her primary duties involve supporting her colleagues in delivering an award-winning payroll outsourced payroll service. She is currently studying for a professional payroll qualification through the Irish Payroll Association.