Holiday pay at year end

When an employee's holiday falls over two tax years, Revenue advises the following:

• Tax credits and rate bands - use these for any holiday pay given in advance. Ensure they match the income tax week and tax year when you make the payment
• Align advance payments - if you pay an employee in advance, ensure the tax credits are correct. They must align with the tax year in which they receive the payment

 NOTE: For more detailed guidance on aligning pay dates, go to revenue.ie 

Follow the relevant scenario for processing holiday pay over payroll year end:

All advanced weeks are within the same tax year

If you process and pay all advanced weeks within the same tax year, use the Advanced Holiday Pay payment. This automatically increases the insurance weeks and ensures PRSI calculates correctly.

Process separate weeks in advance and pay across tax years

Process payments spanning two tax years in advance, with separate payments in December and January.

• Run payroll separately for each tax year:
  • Process the payment in December in the 2024 tax year
  • Process and submit the January payroll in the 2025 tax year, scheduling the payment for January

This ensures correct insurance weeks and PRSI reporting.

Advanced weeks span two tax years

1. Process each week up to week 52 as normal.
   • If the employee is on holiday in week 51, process each week in turn, or use the advance pay option. Pay them up to the end of week 52
2. Process week 1 as normal as a separate pay run.
    NOTE: If you pay your employees by SEPA or Paypath bank transfer, you need to send separate payment files. One up to the end of the last tax year and one for the new tax year. Your employees then receive two separate payments. 

What to do if you process holiday pay incorrectly

If you process holiday payments in the wrong tax year, this can lead to employee payments and tax credits recording incorrectly with Revenue.