Why your employees' pay is higher in January
Each year, we receive many queries from employers and employees about why net pay changes from December to January. This is often due to updates in tax rates, credits, and other payroll-related adjustments introduced in the annual budget. With effect from 1 January 2025, several tax changes under Budget 2025 have resulted in increased take-home pay for many employees compared to 2024.
Standard rate cut-off point (SRCOP): The threshold for the 20% income tax rate has been raised from €42,000 to €44,000, allowing individuals to earn an additional €2,000 at the lower tax rate.
Tax credits: The Personal, Employee, and Earned Income Tax Credits have each increased by €125, bringing them to €2,000. These adjustments reduce the amount of tax payable, increasing employees' take-home pay.
These tax changes mean that many employees will see an increase in their net pay this month compared to December 2024. Employers should take note of these updates when responding to payroll-related queries from employees. If your payroll is managed by the ifac Payroll team, rest assured that we have applied all relevant updates, and we are available to guide you through any payroll-related queries.
