Differences between tax credits, reliefs and exemptions
What are tax reliefs?
Tax reliefs can:
- directly reduce the income on which you pay Income Tax. Revenue will deduct the amount of the relief from your income before your tax is calculated. They may be referred to as an ‘allowance’ or ‘deduction’. For example, Guide Dog Allowance and Employing a carer.
- result in you receiving a refund of tax that you have already paid
- be applied at source, for example, Mortgage Interest Relief, where the mortgage lender reduces your mortgage payments by the amount of the relief.
The amount of relief you receive depends on the rate of tax you pay.
The tax reliefs you can claim depend on your personal situation. You can find many of the reliefs in the Personal tax credits reliefs and exemption section. For example:
You can use myAccount to apply for tax reliefs by selecting ‘Manage your tax 2023’.
Value of the relief
A tax relief may be a specific amount. Otherwise, the value of the relief depends on the highest rate of tax you pay.
If you pay tax at the higher rate:
- the income on which you pay tax at 40% is reduced first. This reduces the portion of your income which is taxable at the higher rate
- any remaining income in excess of your standard rate tax band will be taxed at 40%.
If you pay tax at the standard rate, your income will be reduced by the relief and the balance will be taxed at 20%.