Calculating Income Tax

How to calculate income tax

How is income tax calculated? Read our 5 steps below

Whether you’re 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. We also won’t complicate things by covering Week 1 or Cumulative basis and we’ll ignore PRSI and USC too so we don’t run the risk of overwhelming you.

Calculate Income Tax

 

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:

  1. Find your rate band, tax credits, allowances and relief (click here)
  2. Apply 20% (the standard rate) to your income in your weekly, fortnightly or monthly (depending on your payment frequency) rate band
  3. Apply 40% (the higher rate) to your income that is above your weekly, fortnightly or monthly (depending on your payment frequency) rate band
  4. Add the two values
  5. 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 how to calculate income tax read:

Deductions When Calculating Employee Net Pay

Temporary Wage Scheme

Top 5 Payroll Issues 2021

 

Paycheck Plus, Your Outsourced Payroll Provider

Paycheck Plus is Ireland’s premier payroll outsourcing service. We offer professional and accurate payroll processing tailored to your company’s needs. With a 99.9% accuracy rating we can guarantee that our specialist payroll team will expertly execute your payroll.

Our range of payroll services including international payroll services, payroll consultancypayroll audits, payroll reporting, Irish payroll training, and company registration.

For more information or to request a payroll services quote call our payroll firm on +353 (0) 1 905 9400

Or you can contact our UK payroll service company on +44 (0) 161 464 8720