PAYE stands for Pay As You Earn. As the name suggests, this means that every time your employer / pension provider pays you your salary / occupational pension he or she must deduct income tax, PRSI and USC, where due and pay the amount deducted to Revenue. The PAYE system ensures that the yearly amounts you have to pay are collected on each payday over the tax year. The PAYE system continues to operate for pensioners upon retiring from pensionable employment.

PAYE is normally calculated on a cumulative basis, which means that your yearly tax credits and rate bands are evenly divided over the 52 weeks of the tax year. In some circumstances when it is not possible to tax you on a cumulative basis, income tax is deducted on a non-cumulative basis (also known as a week-1 basis. In this instance, your yearly tax credits and rate bands are granted from the date your Tax Credit Certificate (TCC) is issued and not backdated to the start of the tax year. If you have just started a job and don’t provide a P45  or a Tax Credit Certificate (TCC) you will be placed on emergency Tax.

Personal Tax Credits for 2017 (€)

There has been no change to the Emergency Basis of tax for 2017. Where an employee provides his PPS Number, the Emergency Basis of tax will be calculated as follows:

Pay Frequency SRCOP Tax Credit

Where an employee does not provide his PPS number the higher rate of 40% applies to all earnings from the first pay period.

*PRSI credit applies

People within Class A

People in industrial, commercial, and service type employment who are employed under a contract of employment with reckonable earnings of €38 or more per week from all employments and Public Servants recruited since 6th April 1995.

*PRSI credit applies

People within Class J

Class J applies to people with reckonable earnings of less than €38 per week from all employments. A small number of employees are insurable at Class J regardless of the amount of earnings: employees aged 66 years or over, or people employed in a subsidiary employment. Class J9 applies to the SOLAS allowance paid to those training in SOLAS training centres.

People within Class K

Class K applies to income deriving from positions of certain public office holders (President, Taoiseach, Tánaiste, Ministers of State, Members of either House of the Oireachtas, a member of the European Parliament for a constituency in Ireland, a member of the judiciary, Attorney General, Comptroller and Auditor General; County, City and Town Councillors).

Class K (without the threshold of €100 per week) also applies to:

• The reckonable emoluments or reckonable income of a modified rate (Class B, C or D) contributor;

• The unearned income of an employee or occupational pensioner (aged 16 to 65 inclusive) who has no income from a trade or profession, if that person is a chargeable person for tax purposes.

People within Class M

Class M should be used for people with a NIL contribution liability (e.g. people in receipt of an occupational pension, a lump sum termination payment, employees under 16 years of age, and income of people aged 66 years or over which was previously liable for PRSI under Class S).

People within Class S

Self-employed people and certain company directors and certain individuals in receipt of rental or investment income.

USC is a tax payable on your gross income, including benefits from your employer (for example a company car) and other non-cash payments. It is calculated before deducting your pension contribution. There are different USC rates that apply depending on your particular circumstances and the amount of your income. If your gross income is below a certain amount, you will be exempt from paying USC.

The exemption threshold for paying USC remains at €13,000 for 2017. A person who has income for USC purposes of €13,000 or less will be exempt from USC in 2017. In order for this exemption to apply in payroll, it must be stated on the individual's Tax Credit Certificate.

The 1%, 3% and 5.5% rates of USC have all been decreased by 0.5% to 0.5%, 2.5% and 5% respectively. In addition, the 2.5% USC Rate Band (as outlined in the table below) has been increased by €104 from €6,656 to €6,760.

There has been no change to the 8% rate of USC but the Minister has again stated his intention to abolish the USC completely, on a phased basis by 2020.

Where an individual's income for USC purposes exceeds €13,000, USC applies at the following rates:

*Medical card holders and individuals aged 70 years or over whose aggregate annual income for USC purposes does not exceed €60,000.
The 8% rate of USC applies where an employee is subject to USC under the Emergency Basis.

The following are the appropriate weekly, fortnightly, monthly and annual USC COPs for those liable to USC at the standard rates:

The following are the appropriate weekly, fortnightly, monthly and annual USC COPs for those liable to USC at the reduced rates:

Where an individual has non-PAYE income in excess of €100,000, the excess amount is liable to USC at 11%.