Income Tax (PAYE) Exemption & Marginal Relief


Where Income Tax Exemption applies, it does not mean that an individual does not pay tax or that PAYE is not to be deducted (unlike USC exemption). What it does mean, is that a special SRCOP and Tax Credit is applied and the higher rate of tax to be applied is the marginal rate (40% for 2018).

People aged 65 and over, are subject to the same general tax rules as everyone else but they do get tax exemption limits below which they pay no tax, qualifying for tax exemption and marginal relief. This means that when their wages or pension exceeds a certain limit, they are taxed at 40% instead of the higher rate of tax (which is the same as the higher rate of tax of 40% for 2019).

PAYE Exemption; 2019 Income Thresholds

If your income exceeds the limits for low income exemption, but is less than twice the amount of the limit, then you can claim marginal relief. Under marginal relief, you are taxed only on the amount by which your income exceeds the limit, but a special tax rate of 40% (which is the same as the higher rate of tax of 40% for 2019) applies to this amount.


If the employee/pensioner is entitled to Tax Exemption and Marginal Relief, the Exemption Indicator will be shown as Y and the Higher Rate of Tax will be shown as 40% on the Tax Credit Certificate issued to the employer. The Exemption Case Indicator is shown on both the electronic and paper versions of the RPN.

The employee's entitlement to this relief is decided by Revenue - the employer should just operate PAYE in accordance with the RPN issued.

PAYE Exemption & Marginal Relief: Tax Credit Certificate with Exemption indicator


To update an employees Revenue details to reflect either tax exemption status or marginal relief, simply import a RPN and this will update automatically on import.
Creation date: 02/01/2015 23:46      Updated: 02/01/2015 23:46
2016 Tax Credit Certificate - Exempt Indicator.png
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2018 PAYE Exemption.png
2018 Tax Credit Certificate PAYE Exemption.png
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PAYE Exemption Income Thresholds.png
PAYE Exemption Indicator in CollSoft.png
Basic principles relating to the Irish payroll tax system