If a tax liability does arise, you can:
- Claim additional tax credits that could reduce the tax liability and even generate a tax refund,
- Offset the liability against tax refunds in future years (Revenue tend not to collect liabilities less than €100 – these are automatically carried forward and offset against any future tax refunds), or
- Reduce your tax credits in future years to pay any tax liability (it is Revenue practice that the maximum they will reduce your tax credits by is €1,000 a year. This is to avoid too much financial hardship on you. However, if an amount less than this still causes too much hardship, they are often willing to collect any liability over longer periods of time).
Do I have to pay USC on the Pandemic Unemployment Payment?
Unlike all other social welfare payments, the Pandemic Unemployment Payment is liable to the Universal Social Charge (USC). The USC owed on the PUP will be added to and treated in the same way as the tax liability.
Possible Scenarios
1. Earning less than €317 most weeks:
Generally, a single person has €3,300 worth of tax credits each year. This is enough to ensure they can earn €317 a week tax free. Where someone earns less than €317 a week, they have unused tax credits which will be used against any tax that would be due on the Pandemic Unemployment Payment. For most students and part-time workers this will mean you will not be due to pay any tax on the Pandemic Unemployment Payment at the end of the year.
2. A person earning between €317 and €678 most weeks:
Typically, anyone earning between €317 and €678 a week are paying tax at the standard 20% rate. They also do not have any unused tax credits to carry forward against a liability that may arise from the Pandemic Unemployment Payment.
For these individuals, a tax liability of 20% on the Pandemic Unemployment Payments above €317 a week will generally arise.
3. A person earning more than €678 most weeks:
Where a person had been earning more than €678 a week, they would generally be paying 40% tax on a portion of their income. As they are now in receipt of income less than the higher tax rate threshold, some of the income, which was previously taxed at the higher rate, would now be liable at the lower 20% rate.
This will lead to a tax refund being due in almost every case.