Irish Tax Credits, Reliefs and Exemptions 2026

A payroll guide for employers and employees

If you run payroll in Ireland, you do not decide what tax credits an employee gets. Revenue does. Your job is to retrieve the current Revenue Payroll Notification (RPN) and use the credits, rate band and tax basis it contains. If an employee thinks their credits are wrong, the correction starts with Revenue, not with a manual payroll adjustment.

For employees, the same system works in the opposite direction. You claim or update many credits through Revenue myAccount, Revenue updates your tax record, and the revised position reaches payroll through the RPN.

This guide focuses on the 2026 rules that affect payroll most often: Income Tax bands, the main personal credits, pension relief, health and nursing-home expenses, the Rent Tax Credit, the Mortgage Interest Tax Credit, in-year claims, USC, PRSI and the employer responsibilities that sit around them.

The aim is not to turn payroll into a personal tax advisory service. It is to make the boundary clear. Payroll must know which items it applies directly, which items arrive through the RPN, which claims belong with the employee, and which reliefs sit outside the normal payroll calculation altogether. That distinction prevents well-intentioned manual adjustments from becoming PAYE errors.

For employees, the practical message is just as useful. A credit can change your Income Tax without changing USC or PRSI. A pension contribution can reduce taxable pay for Income Tax but leave USC and PRSI untouched. A prior-year refund may be paid directly by Revenue and never appear on a current payslip. Knowing which mechanism applies explains many of the figures that otherwise look odd on a payslip.

The payroll rule to remember: Apply the latest RPN. Do not add, remove or reallocate an employee’s tax credits yourself. If a credit is not reflected in the RPN, the employee must deal with Revenue before payroll can use it.

Tax credits, reliefs and exemptions are not the same thing

Revenue explains the distinction between tax credits, reliefs and exemptions. The practical point for payroll is that not every relief is a deduction from gross pay.

Example: A single PAYE employee earning €50,000 in 2026 has €44,000 taxed at 20% and €6,000 taxed at 40%. Gross Income Tax is €11,200. If the employee has the €2,000 Personal Tax Credit and €2,000 Employee Tax Credit, those credits reduce the Income Tax bill to €7,200. They do not reduce USC or PRSI.

The payroll calculation in practice

For Income Tax, start with taxable pay, not net pay. Apply any qualifying deductions that are operated through payroll, such as ordinary employee pension contributions under the net pay arrangement. Then apply the 20% and 40% rates using the standard rate cut-off point on the RPN. Only after the gross Income Tax figure is calculated are the tax credits deducted.

USC and PRSI run beside that calculation, not underneath it. That is why a new tax credit can reduce PAYE while leaving the USC and PRSI lines on the payslip unchanged. It is also why payroll should not describe every tax relief as a deduction from gross pay. Different reliefs are delivered in different ways.

How tax credits reach payroll through the RPN

The Revenue Payroll Notification (RPN) is the employer’s operating instruction for PAYE. It contains the employee’s total tax credits, standard rate cut-off point, USC bands and tax basis. Employers receive the total credit figure, not a breakdown of the individual credits behind it.

• Retrieve the latest RPN before processing payroll.
• Use the credits and rate band shown. Do not override them because an employee asks you to.
• If no RPN is available, the emergency basis applies. The emergency rules depend on whether a PPSN has been supplied and the pay frequency.
• If Revenue updates an employee’s credits and issues a cumulative RPN, payroll applies the revised year-to-date position automatically.

Need the emergency rules? See the 2026 Emergency Tax guide for the frequency-specific rates, first-job rules and refund process.

What the employer actually receives

The employer does not receive a list saying which personal credits the employee has claimed. The RPN gives the total credit amount and the payroll figures needed to calculate the deduction. It can also include the standard rate cut-off point, USC cut-off points, the cumulative or Week 1/Month 1 basis, exemption indicators and prior pay and tax from a ceased employment where relevant.

On a cumulative RPN, changes can affect the year-to-date position. If Revenue increases an employee’s credits during the year, the next payroll can produce a larger-than-usual reduction in PAYE or a refund because the cumulative calculation looks back to 1 January. Do not manually smooth that adjustment simply because the payslip looks unusual.

Income Tax rate bands for 2026

The 2026 Income Tax rate bands determine how much income is taxed at 20% before the 40% rate applies.

Two incomes: the extra band is not transferable

For a married couple or civil partnership with two incomes, the combined standard-rate capacity can reach €88,000. The increase is the lower of €35,000 or the income of the lower earner. Revenue is explicit that the increase cannot be transferred between spouses or civil partners.

A useful way to see this is Revenue’s own structure. If Paul earns €55,000 and Gerard earns €20,800, their combined standard-rate band is €73,800. Paul can use €53,000 at 20%. Gerard can use €20,800 at 20%. Paul cannot take Gerard’s €20,800 band and use €73,800 against his own salary.

Home Carer restriction: A couple cannot claim the Home Carer Tax Credit and use the increased two-income standard-rate band in the same tax year.

Main Irish tax credits and allowances for 2026

Personal and Employee Tax Credits

If you are resident in Ireland, Revenue normally gives the basic Personal Tax Credit automatically. The amount depends on marital or civil status. The Employee Tax Credit is separate and is available against qualifying PAYE income, subject to the annual maximum.

Proprietary directors need different treatment. A proprietary director who can directly or indirectly control more than 15% of a company’s ordinary share capital cannot claim the Employee Tax Credit on income from that company. The Earned Income Tax Credit may be available instead.

Earned Income Tax Credit

The Earned Income Tax Credit is the lower of €2,000 or 20% of qualifying earned income. It can apply to self-employed income and pay earned by proprietary directors. If the same individual also has income qualifying for the Employee Tax Credit, their combined Employee and Earned Income credits are capped at the Employee Tax Credit maximum. Under joint assessment, each person’s own qualifying earned income is considered separately.

Home Carer Tax Credit

The 2026 maximum is €1,950. The full credit is available where the home carer’s income is below €7,200. It tapers above that level and is unavailable where income is €11,100 or more, subject to the specific Revenue rules that can apply when a credit was granted in the previous year. Carer’s Allowance and Carer’s Benefit are excluded from the home carer income test.

Single Person Child Carer Credit

The SPCCC is €1,900 in 2026 and comes with an extra €4,000 standard-rate band. Only one claim can be made for the same child in a tax year. The primary claimant can relinquish the credit to a qualifying secondary claimant under Revenue’s rules.

Age, dependent relative and incapacitated child credits

The Age Tax Credit is €245 for a single, widowed or surviving civil partner and €490 for a married couple or civil partnership. Separately, people aged 65 or over may qualify for a full Income Tax exemption where total income does not exceed €18,000 for a single person or €36,000 for a married couple or civil partnership. Those exemption limits are different from the Age Tax Credit itself.

The Dependent Relative Tax Credit is €305 in 2026, with a dependent-relative income limit of €18,548. The Incapacitated Child Tax Credit is €3,800 where the statutory conditions are met.

Widowed and surviving civil partner credits

The credit position after bereavement depends on the year and whether there are dependent children. The Personal Tax Credit rules for 2026 provide a €4,000 credit in the year of bereavement. A widowed person or surviving civil partner without dependent children has a €2,540 personal credit in 2026. Where there are dependent children, the Widowed Parent Tax Credit can apply for the five years after the year of death, tapering from €3,600 in year one to €1,800 in year five.

Payroll does not reconstruct bereavement treatment from HR records. The employee should update Revenue, and the employer applies the revised RPN that follows.

Blind Person’s Tax Credit and Guide Dog Allowance

The Blind Person’s Tax Credit is €1,950 in 2026 where one person qualifies, or €3,900 where both spouses or civil partners qualify. Supporting certification is required.

A person who owns a trained guide dog can also claim the Guide Dog Allowance. The allowance is €825 at the standard 20% Income Tax rate, which is equivalent to a €165 tax credit.

Age exemption is separate from the Age Tax Credit

The small Age Tax Credit is not the same as the Income Tax exemption limits for people aged 65 or over. A person aged 65 or over can be exempt from Income Tax where total income does not exceed €18,000 for a single, widowed or surviving civil partner, or €36,000 for a married couple or civil partnership. The limits can increase for dependent children.

That exemption is for Income Tax only. USC and PRSI have their own rules, so an employee who pays no Income Tax may still have other payroll deductions.

USC and PRSI still sit outside the tax credit calculation

Tax credits reduce Income Tax. They do not reduce USC or PRSI. That distinction matters when an employee expects a new credit to change every deduction on the payslip.

For 2026, the standard USC bands are:

If total income is €13,000 or less, USC is not payable. If income exceeds €13,000, USC is charged on the full income using the applicable bands. Reduced rates can apply to qualifying people aged 70 or over and full medical-card holders with income of €60,000 or less.

Class A PRSI changes on 1 October 2026

The Department of Social Protection Class A schedule changes from 1 October 2026.

Class A includes a tapered employee PRSI credit on weekly earnings between €352.01 and €424. Use the full DSP schedule for employees around those thresholds rather than applying a flat percentage in isolation.

Pension contributions and payroll tax relief

Employee pension contributions can qualify for Income Tax relief at the employee’s marginal rate. There is no employee pension contribution relief from USC or PRSI.

The earnings limit used for calculating employee pension relief is €115,000 per year. For contributions made through payroll under the net pay arrangement, the qualifying contribution reduces pay for Income Tax purposes. USC and PRSI are still calculated without that employee pension deduction.

Employer contributions follow separate rules. Employer contributions to an occupational pension scheme are generally not BIK, subject to the approved scheme funding rules. From 1 January 2025, employer contributions to an employee PRSA or PEPP are exempt from BIK only up to the employer limit of 100% of the employee’s emoluments for the year.

For the detailed treatment of employer-provided benefits, see the Benefits in Kind Ireland 2026 guide.

MyFutureFund is not an ordinary pension tax-relief deduction

MyFutureFund began collecting contributions from 1 January 2026. In 2026 to 2028, the employee contributes 1.5% of gross pay, the employer matches 1.5% and the State adds 0.5%. MyFutureFund contributions are calculated on gross pay and the employee contribution is taken from net pay after deductions.

The employee contribution does not receive ordinary Income Tax relief like a qualifying occupational pension or PRSA contribution. The State top-up is the support built into the scheme instead. Employer contributions to MyFutureFund are not relevant emoluments for USC purposes. Keep the MyFutureFund calculation separate from the net pay pension arrangement used for ordinary tax-relieved employee pension contributions.

For contribution thresholds, eligibility and payroll notifications, see the MyFutureFund payroll guide.

Health, rent, education and other employee claims

Health and nursing-home expenses

Most qualifying health expenses receive relief at 20%. Qualifying nursing-home expenses are different and can receive relief at the individual’s highest rate of Income Tax, up to 40%.

You can only claim the amount you actually bear. Amounts reimbursed by an insurer, the HSE, a public body or another source are not claimable again.

Rent Tax Credit

The Rent Tax Credit is worth up to €1,000 for an individual and €2,000 for a jointly assessed couple in 2026. It is available through 2028.

Eligibility is not based on rent alone. The property use, tenancy type, relationship with the landlord, State housing support and RTB registration where required can all affect the claim. Qualifying rent-a-room or digs arrangements can be eligible even where RTB registration is not required.

Mortgage Interest Tax Credit

For 2026, the Mortgage Interest Tax Credit is calculated at 20% on 50% of the qualifying increase in mortgage interest paid in 2026 over the 2022 baseline. The qualifying amount is capped at €3,125, giving a maximum credit of €625 per qualifying residence.

PAYE taxpayers claim the 2026 Mortgage Interest Tax Credit after year-end through their Income Tax Return in myAccount. It is not an in-year payroll credit for 2026.

Flat-rate expenses and remote working

Flat-rate expenses are occupation-specific reliefs. An employee must qualify for the Revenue-approved amount for their job and claim it through myAccount. Once Revenue updates the employee’s tax position, payroll uses the revised RPN.

Remote working expenses can be claimed through Revenue’s Real Time Credits facility for qualifying current-year expenditure. That is different from the employer-paid €3.20 daily remote-working allowance, which is a separate employer payment and reporting issue.

Employer-paid health insurance and Medical Insurance Relief

Employer-paid medical insurance is first a Benefit in Kind issue. Payroll uses the gross premium as the taxable benefit, even where the insurer applies Tax Relief at Source to reduce what the employer actually pays. The employee may separately be entitled to Medical Insurance Relief through myAccount. Payroll does not subtract that relief from the BIK value.

This is a good example of why the tax mechanism matters. One item can create taxable notional pay in payroll and, separately, a personal tax relief for the employee. Treating the insurer’s net invoice as the BIK value would understate the taxable benefit.

Tuition fees for third-level education

Relief is available at 20% on qualifying third-level tuition fees paid for an approved course at an approved college. The maximum qualifying fee is €7,000 per course, per person, per academic year.

A disregard applies before relief is calculated: €3,000 for full-time courses and €1,500 for part-time courses. Where a person pays fees for more than one student, the disregard is applied once to the overall claim, subject to Revenue’s conditions. Administration charges, student centre levies and similar non-tuition charges do not qualify.

Flat-rate expenses need the correct occupation

Flat-rate expense allowances are not a general work-expense deduction. They are fixed Revenue-approved amounts for specific occupations where employees normally incur qualifying expenses. The employee claims the allowance, Revenue updates the tax position, and payroll then operates the RPN. Do not create a payroll deduction because an employee presents receipts for ordinary work costs.

Special employment reliefs employers should recognise

Special Assignee Relief Programme (SARP)

For employees who arrive in Ireland on or after 1 January 2026, qualifying relief can disregard 30% of employment income above €125,000, subject to the €1 million earnings ceiling, for Income Tax purposes.

Certification timing matters. Where the employer certifies within 90 days, the normal maximum relief period can apply. If certification occurs after 90 days but within 180 days, the first year is lost and relief starts in the following year for a maximum of four consecutive years. From 2026, the annual SARP employer return deadline is 30 June following the relevant tax year.

Foreign Earnings Deduction (FED)

From 2026, the Foreign Earnings Deduction can reduce qualifying employment income for Income Tax purposes by the lower of €50,000 or the amount produced by the statutory formula. It does not reduce USC or PRSI.

At least 30 qualifying days are required. For 2026 to 2030, a qualifying day can be any day spent working in a relevant state where the employee’s presence there is for business reasons connected with the employment. The former three-consecutive-day rule no longer applies. The Philippines and Turkiye are relevant states from 1 January 2026.

FED is normally claimed on the employee’s Income Tax Return rather than as an ordinary payroll deduction. Employers still need to recognise the relief because international travel patterns, assignment documentation and employment income records determine whether the employee can make the claim.

Other specialist annual reliefs

Some personal reliefs sit largely outside payroll even though they relate to employment or professional activity. Examples include Artists’ Exemption for qualifying creative income and Sportsperson’s Relief for qualifying sporting income. These are annual tax-return matters rather than credits an employer should add to a payslip. If Revenue changes the employee’s current RPN as a result of a separate tax adjustment, payroll simply applies the new RPN.

Exempt income, employer awards and social welfare

Statutory redundancy

Statutory redundancy payments are not included as pay for tax purposes. A genuine statutory redundancy payment is exempt from Income Tax, USC and PRSI. Keep it separate from any ex gratia termination payment, because additional termination amounts have their own exemption calculations and conditions.

For payroll, classification comes before calculation. Do not put the statutory element through ordinary taxable pay and then try to correct it later. Identify the statutory and non-statutory elements before the final payroll is processed.

Small Benefit Exemption and long-service awards

The Small Benefit Exemption can keep up to five qualifying non-cash benefits tax-free in 2026, provided their combined qualifying value does not exceed €1,500. It is an employer-provided benefit rule, not a personal tax credit, and qualifying benefits must also be reported under Enhanced Reporting Requirements. For the detailed conditions and excess treatment, use the Benefits in Kind guide rather than trying to recreate the rule from a tax-credit table.

A long-service award can be tax-free where service is at least 20 years, the award is a tangible item rather than cash, vouchers or bonds, the cost is no more than €50 for each year of service, and no similar award has been made within the previous five years.

Share awards and unapproved share options

Gains on unapproved share options realised on or after 1 January 2024 are taxed through payroll for Income Tax, USC and employee PRSI. Employer PRSI can be exempt on qualifying share-based remuneration, but cash-settled awards have different treatment.

Payroll withholding does not replace annual share reporting. Employers operating share arrangements can still have separate annual filing obligations, including Form RSS1, Form KEEP1 or other share-related returns depending on the award. The standard employer share-reporting deadline is generally 31 March following the year in which the activity arose.

Department of Social Protection payments

A social welfare payment can be taxable for Income Tax while remaining outside USC and PRSI. Do not assume that all DSP income is exempt.

Revenue maintains the current lists of tax-exempt DSP benefits and taxable payments. DSP reports many taxable payments directly to Revenue, which can then adjust the employee’s tax record and RPN.

Claiming credits during the year and after year-end

Revenue Real Time Credits

Revenue’s specifically named Real Time Credits facility covers current-year Health Expenses, Nursing Home Expenses and Remote Working Expenses.

Once Revenue processes the claim, an amended RPN is made available to the employer. If the employee is on the cumulative basis, that can produce a payroll adjustment or refund where one is due. There is no reason for payroll to estimate the claim or add it manually.

Example: An employee claims qualifying health expenses in September through Real Time Credits. Revenue processes the claim and makes an amended cumulative RPN available. If payroll retrieves that RPN before the next pay run, the updated year-to-date credit position can reduce PAYE or create a refund on that payslip. Payroll does not need the employee’s medical receipts and should not calculate the claim itself.

Other current-year claims

Many other credits can also be claimed during 2026 through the current-year tax functions in myAccount. These include the Rent Tax Credit, Home Carer Tax Credit, SPCCC, Earned Income Tax Credit and Dependent Relative Tax Credit. They are not all part of the Real Time Credits expense facility, even though they can still affect the employee’s current-year RPN.

Claims for previous tax years

The four-year rule applies. In 2026, PAYE employees can make claims for 2022, 2023, 2024 and 2025 by completing an Income Tax Return in myAccount for the relevant year. A 2022 claim must be submitted by 31 December 2026.

Prior-year refunds are normally paid directly by Revenue to the taxpayer. They are not usually inserted into the current employer’s payroll through a new RPN.

Multiple jobs, marriage and credit allocation

Multiple employments

An employee with more than one job has one overall set of personal credits. They can divide tax credits between employments through myAccount. Revenue then issues RPNs reflecting the allocation for each employment.

Moving credits between jobs changes where tax is deducted during the year. It does not create additional credits.

Married couples and civil partners

Joint assessment can allow credits and the base rate band to be allocated between spouses or civil partners, but the two-income increase has its own non-transferability rule. The lower earner’s additional standard-rate band remains tied to that person’s income. Employers should apply the RPN they receive rather than trying to recreate the couple’s joint assessment inside payroll.

A common mistake is to read the €88,000 maximum as one transferable pot. It is not. If Sarah earns €71,000 and Alex earns €22,500, the combined standard-rate capacity is €75,500. Sarah can use the €53,000 major-earner band. Alex can use €22,500 at 20%. Sarah cannot absorb Alex’s additional band and tax all €71,000 of her own salary at 20%.

The same discipline applies to credits under joint assessment. Revenue can allocate transferable credits and the base band between spouses or civil partners, but payroll should not perform that allocation itself. Use the RPN for each employment and leave the personal assessment mechanics with Revenue.

Employer payroll checklist for tax credits and reliefs

For the reporting workflow behind the RPN and payroll submission, see the PAYE Modernisation Ireland 2026 guide.

Worked payroll scenarios

The examples below are fictional. They show how the rules move between Revenue, the RPN and payroll. They are not personal tax advice.

Scenario 1: a current-year medical expense claim reaches payroll

Aoife is a monthly-paid PAYE employee and claims qualifying health expenses through Real Time Credits in September. Revenue processes the claim and issues an amended cumulative RPN. Payroll retrieves that RPN before the October run. The revised credit position is applied cumulatively from 1 January, so Aoife may see a lower PAYE deduction or a refund in October. USC and PRSI do not change because the claim is an Income Tax relief.

Scenario 2: two-income married couple and the non-transferable increase

Sarah earns €71,000 and Alex earns €22,500. They are jointly assessed. Their combined standard-rate capacity is €75,500: €53,000 plus Alex’s €22,500 income. Sarah cannot use the entire €75,500 against her own salary. Her own major-earner band remains €53,000, while Alex can use €22,500 at 20%. Payroll for each employment follows the RPN issued by Revenue.

Scenario 3: the 1 October 2026 PRSI switch

A company runs September monthly payroll on 2 October, with funds scheduled to reach employees on 5 October. The pay date is 5 October. The Class A rates from 1 October therefore apply, even though all the work was performed in September. For an employee above the relevant threshold, the employee rate is 4.35% and the higher employer rate is 11.40%. A payroll paid on 30 September would use the earlier rates.

Scenario 4: a prior-year claim never touches current payroll

Rónán discovers in 2026 that he had unclaimed health expenses and Rent Tax Credit entitlement for 2022. He completes the 2022 Income Tax Return in myAccount before 31 December 2026. Revenue reviews the closed year and pays any refund due directly to him. His current employer does not add the old credit to the 2026 payroll and does not amend the 2026 RPN for that prior-year refund.

Emergency tax FAQs

General information

This guide is based on Revenue and Department of Social Protection guidance. It is general payroll information, not personal tax, legal or financial advice. Individual entitlement depends on the taxpayer’s circumstances and the current Revenue record.