What Is PAYE and How Does It Work?
5 min read
If you're employed in Ireland, you've almost certainly paid tax through PAYE without ever filing a return. Here's what's actually happening to your salary before it reaches your bank account.
What PAYE actually is
PAYE stands for Pay As You Earn. It isn't a tax in itself — it's the system employers use to deduct Income Tax, USC and PRSI directly from your wages each time you're paid, and remit that money to Revenue on your behalf. You receive your salary already net of these deductions.
How your employer knows what to deduct
- Revenue issues a Tax Credit Certificate (RPN) to your employer, showing your tax credits and standard rate band.
- Your employer runs payroll each period (weekly, fortnightly or monthly), calculating Income Tax, USC and PRSI based on that RPN.
- The deductions are cumulative across the tax year by default, so credits and bands are spread evenly — this is why a bonus or one-off payment can look heavily taxed in a single pay period.
- Your payslip shows gross pay, each deduction, and net pay for that period.
Worked example
Reading a payslip
Gross pay: what you earned before any deductions.
PAYE (Income Tax): calculated on your taxable pay, minus credits.
USC: calculated on gross pay in bands, no credits applied.
PRSI: calculated on gross pay at a flat rate above the weekly threshold.
Net pay: what actually lands in your account.
Emergency tax
If your employer doesn't have an up-to-date RPN for you — commonly when starting a new job before registering it with Revenue — you can be placed on emergency tax, which withholds a higher rate than you'll likely owe. Registering your new job promptly in myAccount avoids this.
Want to see the numbers for your own salary?
Frequently asked questions
Is PAYE a tax, or a collection system?+
PAYE (Pay As You Earn) is a collection system, not a separate tax. It's the mechanism your employer uses to deduct Income Tax, USC and PRSI from your salary before you're paid, and pay it to Revenue on your behalf.
What is a tax credit certificate?+
Revenue issues your employer a Tax Credit Certificate (TCC) showing your tax credits and rate band, so they can calculate your deductions correctly each pay period. You can view and manage yours in Revenue's myAccount service.
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This calculator is provided for informational purposes only and should not be considered financial or tax advice. Figures are estimates based on published Revenue and Central Bank of Ireland rules for the 2026 tax year and may not reflect your personal circumstances. Always confirm your position with Revenue.ie or a qualified professional before making a financial decision.