IE
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This page explains the gap between marginal and effective tax rate. It is designed to answer long-tail questions like “why did my RSU vest feel taxed at 52%?” without implying that your entire income is taxed at that rate.
Marginal rate is what applies to the next euro.
Effective rate is your overall average: total deductions divided by total income.
In a progressive system, marginal rate is often higher than the effective rate.
Extra pay is stacked on top of your regular income, so it can land in higher bands.
For many employees, that means higher-rate PAYE plus USC and PRSI on the incremental amount.
Payroll timing can amplify the feeling in one month, even if the year averages out differently.
Your marginal rate is the rate that applies to the next euro of income. For employees above the standard rate cut-off, the marginal deductions on extra income can include higher-rate PAYE plus USC and PRSI.
Your effective (average) tax rate is total tax divided by total income. It is often lower than the marginal rate because Irish tax is progressive and credits reduce the average burden.
Because the extra amount can be taxed at the marginal combination (PAYE + USC + PRSI). The “52% feeling” is usually about the incremental amount, not your whole salary.
Yes. PAYE is often calculated on a cumulative basis and can vary by month due to timing, credits, and one-off payroll items.