Tax Rates for Retirees in Ireland (2025)

We spend a lot of time planning, analysing and accumulating retirement assets, often without clarity on the tax rates for retirees in Ireland! Time to start fixing that dear reader.

Planning take-home retirement income requires careful consideration of tax bands, credits, and income sources. In 2025, singles and couples can benefit from expanded tax bands and additional credits from 2024, which can and will positively affect their take-home income. Below, I use PWC and Deloitte Tax Calculator to analyse three scenarios to help you understand their effective tax rates and net monthly income.

Scenario A: State Pension Only (Married Couple)

A married couple receiving the full State Pension (Contributory) in 2025 each earns €289.30 weekly, totaling €30,087 per year. This is the max State Pension band for those under 80year old (it increases slightly from 80 onwards!). Once you meet the qualification criteria, the rate of payment you get depends on the number of social insurance (PRSI) contributions you have made. Having at least 2080 full rate contributions will result in the maximum rate of State Pension being awarded.

Tax Breakdown:

• Income Tax:
  If you are aged 65 or over, a single person can receive €18,000 (€36,000 for married couple), totally exempt from Income. If you 65+ in 2025, you will pay zero Income Tax on the €30,087 in Scenario A.
• If you are under 65, and are receiving €30,087 as a couple, you’ll pay a tiny amount of USC and some PRSI, zero Income Tax due to Credits, so your effective tax rate is c5% only. 5%!
• Universal Social Charge (USC):
  After subtracting this threshold, their total USC is €240 per year
• PRSI: Good news, people over 66 are exempt

What is the total effective tax rate on the retirement income?

Effective Tax Rate for 65+: 1%

Net take-home of €2,487 per month, or €29,844 of the €30,087!

Effective Tax Rate for under 65s: c5%

Scenario B: State Pension + €40,000 ARF Income (Married Couple)

Assume the couple receives a combined State Pension of €30,087 and €40,000 (say 4% of a €1m ARF pot in one person’s name only) from an Approved Retirement Fund. Total income is €70,087.

Tax Breakdown:

• Income Tax:
  • Tax at 20%: €13,608
  • Tax at 40%: €816
  • Total tax: €14,424
  • After applying tax credits (€8,490 credits), the total Income Tax liability is €5,935.
• USC: Total USC: €1,041
• PRSI: Exempt
• €6,976 total deductions on €70,087 Income

What is the total effective tax rate on the retirement income?

Effective Tax Rate for 65+: 10%

€70,000 of income often will cause many to assume a 30% or even 40% tax rate, but far from it.

Net take-home of €5,259 per month, or €63,107 of the Gross €70,087!

Effective Tax Rate for under 65s: c15%

With no age-related credit, and paying PRSI, the total effective tax rate if you have €70k household income, is marginally higher at 15%.

If you were single, under 66, and receiving say €40k ARF income plus another €15k income from rental income or earnings, your total effective tax rate would be c22%, taking home c€45k of the gross €55k earnings.

Scenario C: State Pension + €80,000 ARF Income (Married Couple)

Here, the couple receives €30,087 from the State Pension and importantly, each person has an ARF of €1m, and are drawing €40k from their own ARF per year. Total income here is €110,087. It generates sufficient income so they can leave their other savings untouched, growing and compounding for future gifting and enjoying. But heck, what tax rate will they pay on €110k income!?

Tax Breakdown:

• Income Tax:
  • Thanks to both having ARF income here, First €88k is at lower band and taxed at 20%: €17.6k
  • Remaining €22k taxed at 40%: €8,835
  • Total Income Tax before credits: €26,435
  • After tax credits (€8,490), tax liability is €17,945
• USC: Total USC: €1,841
• PRSI: Exempt
• Total Deductions €19,786

What is the total effective tax rate on the retirement income of €110k?

In this scenario, the couple take home €90,000 of the €110,000 income!

Effective Tax Rate for 65+: 18%

€110,000 of income, when both are earning up to the standard-rate cut-offs helps to actually reduce the overall effective tax rate versus Scenario B!

Under 66 couple: Effective Tax Rate for €110k income for couple (both with ARF income) under 65s: c23%

Single:

If you were single, under 66, and receiving say €80k ARF income (from €2m ARF pot) plus another say €30k income from rental income or earnings, your total income here is again €110k. Instead of paying total effective tax of 23% (couple under 66), your total effective tax rate would be c36%, taking home c€70k of the gross €110k earnings.

Additional Insights for Couples

1. Double Tax Bands and Credits: A single person can earn €44k in 2025 before they go into the higher rate, whereas a married couples benefit from an increased standard-rate tax band of €53,000 plus an additional €35k max before their incomes go into the higher bracket (88k at 20%!).
2. Additional age credits substantially reduce couples’ tax liability compared to single individuals.
3. Optimize ARF Withdrawals: Retirees with ARFs should carefully manage withdrawals to avoid crossing into the higher tax bands, unless you need or want to!
4. State Pension Considerations: The State Pension is a stable, tax-efficient income source, but couples should monitor how it interacts with other income streams when planning withdrawals

Conclusion

Understanding how tax works for different income levels can help us optimise retirement incomes. By utilizing tax bands, credits, and ARF strategies effectively, retirees can reduce their effective tax rates and maximize take-home pay. Decisions and planning done many years in advance can pay huge dividends when the time comes. As always, when things aren’t urgent, but important, is the time to get at it!

I hope it helps.

Paddy Delaney QFA RPA APA

We’ve done all we can to verify the accuracy of the calculations above, but please do your own due-diligence, and seek tax or financial advice to verify your own circumstances.

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