How Is a Bonus Taxed in Ireland? (2026 Guide)
PAYE, USC and PRSI on bonuses explained with worked examples. Find out exactly how much of your bonus you actually keep.
PAYE, USC and PRSI on bonuses explained with worked examples. Find out exactly how much of your bonus you actually keep.
There is no special bonus tax rate in Ireland. A bonus is treated as employment income and is subject to the same PAYE income tax, USC (Universal Social Charge) and PRSI rates that apply to your regular salary. The amount you keep depends on your total annual income and which tax band your bonus falls into once added to your earnings.
Because the bonus is added to your gross pay in the pay period it is received, a large bonus paid in a single month can temporarily push you into the 40% income tax band even if your annual salary sits below the standard rate cut-off of €44,000. This is the single biggest source of confusion for employees expecting to receive a large portion of their bonus.
Key rule: If your total annual income exceeds €44,000, the portion above that threshold (including any bonus) is taxed at 40% income tax plus USC and PRSI — meaning you may keep as little as 57% of a bonus that falls in the higher band.
Your employer adds the bonus to your gross pay for the period and calculates PAYE, USC and PRSI on the combined figure. Revenue's RPN (Revenue Payroll Notification) tells your employer how much cumulative income you have earned and how much tax has already been deducted, so the system automatically adjusts for your annual position.
The three deductions on a bonus paid to a higher-rate taxpayer in 2026 are:
Combined, this gives an effective deduction rate of approximately 43% for income in the 40% band, meaning you keep around 57 cents of every euro.
This example uses a single PAYE employee with standard tax credits.
| Item | Salary Only (€60k) | Salary + Bonus (€65k) |
|---|---|---|
| Gross Income | €60,000 | €65,000 |
| Income Tax | ~€12,391 | ~€14,391 |
| USC | ~€2,441 | ~€2,641 |
| PRSI (4.1%) | ~€2,460 | ~€2,665 |
| Net Annual Take-Home | ~€43,609 | ~€47,239 |
The €5,000 gross bonus yields approximately €3,630 in extra take-home pay — equivalent to 72.6% of the gross bonus. Some of the bonus falls into the 20% band and some into the 40% band, which is why the effective deduction is lower than the maximum 43%.
| Item | Salary Only (€45k) | Salary + Bonus (€48k) |
|---|---|---|
| Gross Income | €45,000 | €48,000 |
| Income Tax | ~€6,200 | ~€7,400 |
| USC | ~€1,574 | ~€1,694 |
| PRSI (4.1%) | ~€1,845 | ~€1,968 |
| Net Annual Take-Home | ~€35,381 | ~€36,938 |
The €3,000 gross bonus yields approximately €1,557 extra net — equivalent to 52% of the gross bonus. Because the €45,000 salary is already very close to the €44,000 cut-off, most of the bonus falls into the 40% band immediately.
| Marginal Rate | Gross Bonus | Approx Net Received | % Kept |
|---|---|---|---|
| 20% band (total income below €44k) | €1,000 | ~€760 | 76% |
| 20% band (total income below €44k) | €5,000 | ~€3,800 | 76% |
| 40% band (total income above €44k) | €1,000 | ~€570 | 57% |
| 40% band (total income above €44k) | €5,000 | ~€2,850 | 57% |
| Mixed (bonus straddles both bands) | €5,000 | ~€3,300–€3,700 | 66–74% |
Figures are approximate. Use the salary calculator with your exact total income for a precise calculation.
The most effective legal way to reduce the tax on a bonus is to direct some or all of it into your pension as an Additional Voluntary Contribution (AVC). Pension contributions are deducted before PAYE and USC are calculated, so every euro contributed saves you 40% income tax plus 4% USC if you are a higher-rate taxpayer — a combined saving of up to 44%. PRSI is not relieved on pension contributions.
To do this, you must instruct your employer to deduct the AVC from the bonus before the payroll is run. You cannot retroactively claim the PAYE/USC relief after the fact through Revenue — this must happen at payroll stage for a bonus.
If your employer offers a salary sacrifice scheme for a cycle-to-work bike, public transport annual pass or other approved benefits, contributing part of your bonus into these schemes can reduce taxable pay in the same way as pension AVCs.
If a bonus is discretionary and your employer has flexibility over when it is paid, receiving it in January rather than December can sometimes result in a different effective rate if your income levels will differ materially between the two tax years. However, most employers pay bonuses on a fixed cycle and this option is not typically available to employees.
Under Revenue rules, employers can give employees up to €1,000 per year in non-cash benefits completely free of PAYE, USC and PRSI. This is known as the Small Benefit Exemption.
The most common use is a One4All voucher or similar gift card. Conditions that apply in 2026:
For a higher-rate taxpayer, a €1,000 voucher saves approximately €430 in tax compared to receiving the same amount as a cash bonus — making it a worthwhile structure for both employer and employee.
Ask your employer: If you receive a cash bonus, ask whether some of it can instead be structured as a non-cash voucher under the Small Benefit Exemption. Many larger employers already facilitate this.
Tax on a bonus is deducted automatically through PAYE in the same payslip in which the bonus is paid. There is nothing additional required from you as an employee. Your employer calculates the combined PAYE, USC and PRSI on your total pay for that period and remits the deductions to Revenue on the same schedule as your regular payroll.
You do not need to file a tax return (Form 11 or Form 12) solely because you received a bonus. However, if you have other income outside PAYE — rental income, share options, foreign income — you may already have an obligation to file, in which case your bonus will appear as part of your total employment income.
If your employer makes any error in the PAYE calculation on a bonus (which can happen with one-off large payments), Revenue will reconcile this in the annual end-of-year tax statement issued via myAccount, and any overpayment will be refunded.
A bonus is treated as regular employment income and subject to PAYE income tax, USC and PRSI at the same rates as your salary. It is added to your gross pay in the month it is received.
Yes — making an AVC (Additional Voluntary Contribution) from your bonus before payroll is processed gives you full PAYE and USC relief at your marginal rate. This must be arranged with your employer before the bonus payrun, not after.
It allows employers to give up to €1,000 per year in non-cash benefits (such as One4All vouchers) free of PAYE, USC and PRSI. A maximum of two qualifying benefits per year, with a cap of €500 per individual benefit.
Tax is deducted via PAYE in the same payslip the bonus is paid. Your employer handles everything — no separate action is required from you.
Roughly 76% if the bonus falls entirely in the 20% income tax band (total income below €44,000), or approximately 57% if it falls in the 40% band. Bonuses that straddle both bands will give an effective retention rate somewhere between the two.
It can be, particularly for cycle-to-work or travel pass schemes. However, salary sacrifice reduces PRSI contributions and can affect your pensionable pay baseline, so model the full impact before committing to a large sacrifice.