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Tax relief for new start-up companies

How is the relief calculated?

The amount of employer's Pay Related Social Insurance (PRSI) you pay determines how much relief you can claim. Your relief will be limited to the total amount of employer’s PRSI you pay. This amount may be reduced if you pay over the relief limit of €5,000 per employee or the total PRSI limit of €40,000. For example, if you pay employer’s PRSI of €6,000 for one employee, only €5,000 will be considered for relief.

From January 2025, the amount of PRSI paid by certain company directors under Class S also determines how much relief you can claim. This PRSI must relate to emoluments you have paid to the individual and which you have collected under the PAYE system. Relief is limited to a maximum of €1,000 Class S PRSI per individual. A total PRSI limit of €40,000 applies to all employer’s PRSI and Class S PRSI payments.

  • Example 1

    Your company’s accounting period ends on 31 December 2024. Your Corporation Tax (CT) liability is €25,000. This is less than €40,000, so you can claim the relief.

    Your employer's PRSI payments
    Employee 1 €2,000
    Employee 2 €4,000
    Employee 3 €6,500
    Total PRSI €12,500

    Your qualifying employer's PRSI payment is €11,000 (Employee 3’s PRSI is capped at €5,000, so €1,500 is not considered for relief).>

    The relief available to you under section 486C is €11,000. You can claim Start-up Relief in your CT return and reduce your CT liability by €11,000. Only CT relating to profits from your qualifying trade can be reduced.

  • Example 2

    Your company’s accounting period ends on 31 December 2025. Your Corporation Tax (CT) liability is €25,000. This is less than €40,000, so you can claim the relief.

    PRSI Payments
      Employer's PRSI Class S PRSI
    Employee 1 (Class A) €2,000  
    Employee 2 (Class A) €4,000  
    Director 1 (Class A) €3,000  
    Director 2 (Class S)   €500
    Director 3 (Class S)   €1,200
    Total PRSI €9,000 €1,700

    Your qualifying employer’s PRSI payment is €9,000. Your qualifying Class S PRSI payment is €1,500. Director 3’s Class S PRSI is capped at €1,000, so €200 is not considered for relief. Your total qualifying PRSI is €10,500.

    The relief available to you under section 486C is €10,500. You can claim Start-up Relief in your CT return and reduce your CT liability by €10,500. Only CT relating to profits from your qualifying trade can be reduced.

Partial relief

If your total CT due is more than €40,000 but less than €60,000 you may be entitled to partial (also known as marginal) relief instead of full relief.

CT due on the profits of your qualifying trade can be reduced to the greater of the amount:

  • calculated using the marginal relief formula
  • and
  • of CT due on your qualifying trade profits after deducting the total amount of qualifying PRSI.
  • Example 3

    Your company’s accounting period ends on 31 December 2024. Your CT liability is €50,000. Of this CT liability, €45,000 is referable to income from your qualifying trade and €5,000 relates to investment income. You can claim for partial relief.

    Your employer's PRSI payments

    Employee 1

    		 €2,500
    Employee 2 €1,000
    Employee 3 €5,000
    Employee 4 €5,000
    Employee 5 €4,000
    TOTAL €17,500

    Your qualifying employer's PRSI payment is €17,500.

    The amount of CT due on your qualifying trade profits can be reduced to the greater of (i) or (ii) below:

    (i) - Marginal Relief formula of 3 × (T-M) × ((A+B)÷T)

    T = total CT due on, all income and chargeable gains for the accounting period. This is €50,000.

    M = lower relevant maximum amount, that is, €40,000.

    A =CT due on income from your qualifying trade for the accounting period. This is €45,000.

    B = CT due on chargeable gains from your qualifying trade for the accounting period. This is €0.

    3 × (€50,000 - €40,000) × ((€45,000 + €0) ÷ €50,000) = €27,000.

    (ii) - Corporation Tax on qualifying trade profits less Qualifying PRSI

    (€45,000 + €0) - €17,500 = €27,500.

    The greater amount is achieved with the second calculation: €27,500.

    Your CT due of €45,000 on your trade income can be reduced to €27,500. Therefore, the partial relief you can apply for is €17,500 (€45,000 - €27,500 = €17,500).

    The net CT you will pay is €32,500 (i.e. €27,500 CT on your qualifying trade income after claiming relief plus €5,000 CT on your investment income).

Carry forward of unused relief

Since 2013, it may be possible for your company to carry forward any unused relief from:

  • the first five years of trading where the qualifying trade commenced on or after 1 January 2018
  • or
  • the first three years of trading where the qualifying trade commenced before 1 January 2018.

The relief amount used in a later year cannot exceed the total PRSI in that year.

  • Example 4

    This company has been entitled to full relief. The qualifying trade commenced on 1 January 2018.

    Tax paid and relief from 2018-2024
    Year  2018  2019  2020  2021  2022  2023  2024
     Employer's PRSI paid  9,000  9,000  9,000  9,000  10,000  10,000  11,000

    Trading Profits € 

    		  8,000  7,000  20,000  50,000  60,000  96,000  80,000
    Corporation Tax (12.5%)  1,000  875  2,500  6,250  7,500  12,000  10,000
    Relief used  (1,000)  (875)  (2,500)  (6,250)  (7,500)  (10,000)  (10,000)
     Net tax due after relief  0  0  0  0  0  2,000  0
    Unused relief  8,000  8,125  6,500 2,750  2,500    

    Total relief to be carried

    forward after five years

    		          27,875    

    The relevant five-year period is from 2018 to 2022. Relief can be claimed in each of these years to reduce CT due to nil. The total amount of unused relief at the end of 2022 is €27,875. This can be carried forward to future years. In 2023, carried forward relief of €10,000 can be used (relief cannot exceed the PRSI paid in 2023). In 2024, carried forward relief of €10,000 can be used. This leaves a balance of €7,875 unused relief that can be carried forward to 2025 (and later periods until it is fully used up).

Carry forward of partial relief

Your company may have been entitled to marginal relief. If your total qualifying PRSI payment was more than the CT due in the accounting period, you may be able to carry forward the unused relief. The amount to be carried forward is equal to the additional marginal relief available if the CT due and PRSI payment had been the same.

How to calculate carry forward of partial relief

There are three steps to the calculation:

Step 1: Calculate the marginal relief in the usual way.

              3 × (T-M) × ((A+B)÷­T)

Step 2: Calculate the marginal relief as if the Corporation Tax and qualifying PRSI payment were the same,

             C- [3 × ((T-M) × C÷­T)]

where C is your total qualifying PRSI payment and T and M are the same as in Step 1.

Step 3: Deduct the Step 1 amount from the Step 2 amount for the marginal relief that can be carried forward.

Additional worked examples of Start-up relief are included in Tax and Duty Manual Part 15-03-03.

Next: How do you apply for tax relief for your start-up company?

Published: 02 April 2025 Print this page

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