How credits work, and how they differ from bands
Two separate mechanisms decide what you actually pay, and they are constantly confused.
- Your standard rate band decides how much income is taxed at 20% before the 40% rate starts.
- Your tax credits then reduce the resulting tax bill, euro for euro.
A €2,000 credit reduces your tax by €2,000, not your income by €2,000. That makes credits worth the same to every taxpayer regardless of rate, which is the opposite of how a relief such as pension contributions works.
The main credits for 2026
| Credit | Amount |
|---|---|
| Single person | €2,000 |
| Married or in a civil partnership | €4,000 |
| Employee Tax Credit | €2,000 |
| Earned Income Tax Credit | €2,000 |
| Home Carer Tax Credit | €1,950 |
| Age credit, single or widowed | €245 |
| Age credit, married or civil partners | €490 |
| Dependent Relative | €305 |
The standard rate band for 2026 is €44,000 for a single person, €48,000 for a single person qualifying for the single person child carer credit, and €53,000 for a married couple with one income, with a transferable increase of up to €35,000 where both spouses have income.
Employee credit or Earned Income credit?
The Employee Tax Credit applies to PAYE income. The Earned Income Tax Credit applies to self-employed trading or professional income, and to proprietary directors who cannot claim the Employee Tax Credit.
If you have both PAYE and self-employed income in the same year, you do not get both credits in full. The combined amount is capped, and it is a routine source of over-claiming on a first self-assessment return.
For an owner-managed company, which credit a director receives depends on their shareholding and how they are paid. It is worth checking rather than assuming, because the answer changes the take-home figure.
Credits business owners regularly miss
- The Earned Income Tax Credit, where a director has never claimed it because payroll defaulted to the Employee credit.
- The Home Carer Tax Credit, where one spouse has reduced or stopped work to care for a dependent person. It is worth €1,950 and is claimed on the return, not automatically.
- The Dependent Relative credit, at €305.
- Health expenses relief at 20% on qualifying medical costs, including many dental treatments, which is a relief rather than a credit but is claimed the same way.
- Remote working relief on the proportion of electricity, heating and broadband attributable to working from home.
You can go back four years
A claim for tax credits or reliefs can generally be made for the four years preceding the current one. If you have never claimed something you were entitled to, that is four years of refunds, not one.
Where credits fit for an owner-manager
Credits are the smallest lever available to a business owner, and the easiest to leave unused. The larger levers are the structure you trade through, how you extract profit, and employer pension contributions.
But credits cost nothing to claim and apply every year, so they belong in the same annual review as everything else.