Rates last updated: 22 October 2026 · How we verify
How a Bonus Is Taxed in Ireland: The Marginal Rate, a Worked Example, and What Actually Reduces It
A bonus in Ireland is taxed as pay, in the pay period it is paid. There is no separate bonus rate. The reason it feels like one is that every euro of a bonus lands on top of your salary, so it is taxed at your highest rates: income tax at 40% once you are above the €44,000 band, USC at the band your total pay has reached, and PRSI at 4.35%.
- A bonus is taxed through PAYE like other pay: for a single employee on €60,000, a €5,000 bonus costs 47.35% (40% income tax, 3% USC, 4.35% PRSI), so €2,632.50 reaches you.
- On €80,000 the USC rate is 8% and the marginal cost is 52.35%.
- Your payroll basis, a pension contribution and the €1,500 small benefit exemption change the number: run yours in the Salary After Tax calculator.
Below: why the marginal rate applies, the worked example month by month, what a Week 1 basis does to a bonus, the three legitimate ways to keep more of it, and what to check on the payslip.
Why a bonus is taxed at your highest rate
- Your salary has already used your credits and rate band, so every bonus euro above the €44,000 band is taxed at 40%.
- PAYE on a cumulative basis works out the tax due on everything earned so far in the year, each month, and deducts the difference.
- USC is charged at the band your cumulative pay has reached, and PRSI at 4.35% applies to all of it.
The same mechanism explains why, on a lower salary, a bonus paid in January is sometimes taxed more lightly than one paid in December. In January your cumulative pay is small, so part of the bonus may still fall inside the 20% band; by December the salary has used the band and the bonus is entirely at 40%. The total for the year ends up identical, because the Statement of Liability reconciles everything; only the month-to-month timing differs.
Revenue's page on how your income tax is calculated sets out the cumulative method.
A concrete example
- A single employee on €60,000 paid a €5,000 bonus in November 2026 loses €2,000 income tax, €150 USC and €217.50 PRSI, €2,367.50 in total.
- They keep €2,632.50 of the bonus.
- On €80,000 the USC on the bonus is €400 rather than €150, and the employee keeps €2,382.50.
€60,000 salary, €5,000 bonus, single, standard credits, paid after 1 October 2026:
| Calculation | Amount | |
|---|---|---|
| Income tax | the whole bonus sits above the €44,000 band | €5,000 × 40% = €2,000.00 |
| USC | total pay €65,000 is inside the 3% band (€28,700 to €70,044) | €5,000 × 3% = €150.00 |
| PRSI | 4.35% from 1 October 2026 | €5,000 × 4.35% = €217.50 |
| Deducted from the bonus | €2,367.50 (47.35%) | |
| You keep | €2,632.50 |
Same bonus on an €80,000 salary: total pay €85,000 is above €70,044, so USC on the bonus is 8%: €400.00. Income tax €2,000.00 and PRSI €217.50 are unchanged. Deducted: €2,617.50 (52.35%); you keep €2,382.50.
Two things worth noticing. The 40% is the ordinary higher rate, not a bonus rate; the salary already filled the 20% band. And the difference between the two cases is entirely USC: a €5,000 bonus that straddles €70,044 is charged 3% on the part below and 8% on the part above, which is why two colleagues with the same bonus can see different deductions.
The figures use the 2026 rates in our Salary After Tax calculator: a €44,000 standard rate band, USC of 0.5%, 2%, 3% and 8%, and PRSI of 4.35% from 1 October 2026. Budget 2027 moves the band to €46,500 and the 2% USC band to €30,300 from January 2027, subject to the Finance Bill; see what Budget 2027 changes.
What a Week 1 basis does to a bonus
- On a Week 1 or Month 1 basis each pay period stands alone, with one month's band (€3,666.67) and one month's credits (€333.33).
- A bonus month can then push pay above the monthly band even when the year is inside it, so the bonus is over-taxed and nothing recalculates until you file a return.
- The overpayment is refunded through the Statement of Liability, not through payroll.
A single employee on €40,000 is never in the 40% band on a cumulative basis. Paid a €4,000 bonus in a Month 1 period, that month's pay of €7,333.33 is €3,666.66 above the monthly band, so €3,666.66 of the bonus is taxed at 40% instead of 20%: €733.33 more than the year requires. Annual income of €44,000 sits exactly on the band, and the €733.33 comes back only when the year is reviewed.
The basis is printed on the payslip. If it says anything other than "Cumulative", the bonus month is worth checking, and how to read your Irish payslip shows where. If the basis is "Emergency", the problem is bigger than the bonus and is covered in emergency tax in Ireland.
Three things that legitimately reduce it
- A pension contribution or AVC gets 40% income tax relief on the bonus (not USC or PRSI): €5,000 contributed costs you €3,000 net and all €5,000 goes in.
- A non-cash reward of up to €1,500 a year, in up to five benefits, is fully tax-free under the small benefit exemption.
- Shares or RSUs are taxed as pay at vesting but can be planned around; nothing else turns a cash bonus into something other than pay.
- Pension contribution or AVC. Relief is at your marginal income tax rate, within the age-related limit (20% of earnings at 30 to 39, 25% at 40 to 49, up to 40% from 60) on earnings capped at €115,000. On the €60,000 example, putting the €5,000 into an AVC removes the €2,000 of income tax but not the €150 of USC or €217.50 of PRSI: €5,000 lands in the pension for a net cost of €367.50 of charges plus the €2,632.50 you would otherwise have received. The limits and the October election are in AVC and pension tax relief.
- Small benefit exemption. Since 1 January 2025 an employer can give up to five non-cash benefits a year with a combined value of up to €1,500 free of income tax, USC and PRSI. Vouchers qualify only if they cannot be redeemed for cash; a single benefit over €1,500 is taxed in full. Revenue's rules are on its small benefit exemption page.
- Shares instead of cash. RSUs and most share awards are taxed through payroll as pay when they vest, at the same marginal rates as a bonus, so they are not a tax saving in themselves; the later growth is capital gains at 31%. The mechanics, including sell-to-cover, are in RSU tax in Ireland.
What does not work: asking for the bonus to be paid in a different month (the year's total is the same), splitting it across two payslips (same), or having it paid as "expenses" (taxable, and a problem for both sides).
Bonuses that cross a year or a job
- A bonus is taxed in the year it is paid, not earned: a 2026 bonus paid in January 2027 is 2027 income, on 2027 bands and credits.
- A bonus paid after you've left the employer is still pay from that employment and goes through payroll.
- If you've left Ireland by then, it's part of the departure-year review.
For people who arrived or left Ireland part-way through a year, the bonus month is usually inside the same part-year refund as everything else: credits for twelve months against pay for fewer. The arithmetic is in leaving Ireland: the tax refund you might be owed.
If the bonus takes your total income over €100,000, nothing changes for an employee; the 3% USC surcharge above €100,000 applies to self-employed income only.
What Revenue actually asks for
- Nothing in the bonus month itself: payroll reports it.
- At year end the Employment Detail Summary shows the bonus inside your total pay, and the Income Tax Return reviews the year as a whole.
- Keep the bonus payslip: it's the only document showing the basis and band applied that month.
- The bonus payslip, with the basis line (Cumulative, Week 1, Emergency) and the cut-off point used.
- Your AVC certificate if you contributed the bonus to a pension outside payroll, because that relief is not automatic.
- Your Employment Detail Summary for the year, from myAccount.
If a bonus month looks over-taxed and you cannot see why, our Payslip Review reads it line by line, checks the basis and tells you whether the correction comes through payroll or through a return.
Where to start
Find the basis line on the bonus payslip. "Cumulative" means the deduction is probably right and the number is simply your marginal rate; anything else means the year needs a return.
Related reading
Questions we get asked
Is there a bonus tax rate in Ireland?
No. A bonus is taxed as ordinary pay in the period it is paid, at your marginal rates: 20% or 40% income tax, USC at the band your total pay has reached, and PRSI at 4.35%. The combined rate on a bonus for a higher-rate taxpayer is 47.35% or 52.35%, depending on whether total pay is above €70,044.
Why was more than half of my bonus deducted?
Because the bonus sits on top of your salary, which has already used your 20% band and credits. On pay above €70,044 the marginal rate is 40% income tax plus 8% USC plus 4.35% PRSI, 52.35%. If your payroll runs on a Week 1 basis the deduction can be higher still, and the excess is refunded through the year-end return.
Can I put my bonus into my pension to avoid tax?
A pension contribution or AVC gets income tax relief at your marginal rate within the age-related limits, so the 40% income tax on the bonus is removed. USC and PRSI still apply. The contribution has to be inside your annual limit, and if paid outside payroll the relief has to be claimed.
Is a Christmas voucher from my employer taxed?
Not if it falls within the small benefit exemption: up to five non-cash benefits a year with a combined value of up to €1,500, in vouchers that cannot be redeemed for cash. A cash bonus, or a single benefit over €1,500, is taxed in full as pay.
My bonus for 2026 is paid in January 2027. Which year is it taxed in?
2027. A bonus is taxed in the year it is paid, on that year's bands and credits, regardless of the year it relates to.