SWA Penalty Rates - Jobseekers

An Introduction To The Tax and Social Insurance System in Ireland

Some Important Terms

To start with, here are a few terms that are useful to define:

Gross Pay: This is your total pay before any income tax, USC, PRSI or Pension payments are taken.

Net Pay: This is your total pay after any income tax, USC, PRSI or Pension payments are taken.

Universal Social Charge (USC): You pay Universal Social Charge (USC) if your gross income is more than €13,000 per year. Once your income is over this limit, you pay the USC on all of your income. The USC charge applies to all PAYE workers and self-employed people, with an income above €13,000. The Universal Social Charge is payable on gross income, including notional pay (notional pay is the value of a non-cash benefit, such as benefit-in-kind), after any relief for certain capital allowances. Income from Ireland or income sourced from Ireland is subject to the USC. The Universal Social Charge is payable on pension contributions. Liability for the USC depends on the date

of the payment rather than on when the income was earned.

Universal Social Charge Rates

There are two rates under the USC – Standard Rate and Reduced Rate

Standard Rate: The standard rate of USC will be applied as follows to gross income of €13,000 or more:

The first €12,012: 0.5%

The next €13,748: 2%

The next €48,748.99: 4.5%

The Balance left: 8%

Self-employed over €100,000: 11%

Reduced rates: Reduced rates apply to people aged 70 and over whose aggregate income is €60,000 or less, and to full medical card holders whose aggregate income does exceed €60,000. People who hold a GP visit card, a Drugs Payment Scheme Card, a European Health Insurance Card or a Long-term Illness Scheme Card do not qualify for the reduced rate. People who hold Northern Ireland medical cards are no longer be treated as holding a full medical card and will therefore not qualify for a reduced rate. Aggregate income for USC purposes does not include payments from the Department of Social Protection. These are shown below:

The first €12,012: 0.5%

All income over the first €12,012: 2%

USC and Income

You may be liable to pay the USC on your income, even if you have no liability to pay tax on that income because of tax credits or by the use of losses or capital allowances.

Redundancy payments: Statutory redundancy payments are exempt from the USC, Voluntary

Severance / Voluntary Separation payments are not. Employers and pension providers are responsible for deducting the Universal Social Charge from their Employees’ salaries.

Changes In Circumstances

You should inform Revenue of any changes in your circumstances (for example, if you get a medical card) so your Tax Credit Certificate can be amended.

Record Of USC Payment

Details of the Universal Social Charge should be recorded separately on your payslip. The total amount of USC paid should be shown on your P60 each year. If you change jobs you will no longer get a P45 when you leave a job. Instead, your employer will enter your leaving date and details of your final pay and deductions into Revenue’s online system and you can access these

details through Revenue’s myAccount service on www.ros.ie.

Related Social Insurance (PRSI)

When you are in employment you make Pay Related Social Insurance (PRSI) contributions each week, often referred to as “Stamps”, which are deducted directly from your wages. Pay Related Social Insurance (PRSI) contributions go to the Social Insurance Fund (SIF) which helps pay for Social Welfare benefits and pensions and provide for the payment of ‘benefit’s in the event that you

become unemployed (Jobseeker’s Benefit) or if you are ill (Illness Benefit) and unable to work. These PRSI contributions may also count towards your contributory old age pension in the future

Employees: Most employees pay Class A PRSI contributions and are covered for all Social Welfare benefits and pensions. This applies to people in industrial, commercial and service type employment who are employed under a contract of service. It also applies to civil and public servants recruited from 6th April 1995.

Self-Employed: Self-employed people normally pay Class S PRSI. Self-employed people paying

Class S PRSI may qualify for; Adoptive Benefit, Guardians Payment Contributory, Invalidity Pension, Jobseeker’s Benefit Self-Employed, Maternity Benefit, Parent’s Benefit, Partial Capacity Benefit, Paternity Benefit, State Pension Contributory, Treatment Benefit, Widow’s, Widower’s or Surviving Civil Partner’s Contributory Pension. All persons are required to satisfy the underlying qualification conditions for any of these schemes including satisfying any PRSI contribution requirement.

How much PRSI do you pay? For employees, PRSI is calculated on their gross weekly earnings, and is

deducted through PAYE. These are the rates:

Earning under €352 per week: You will not pay any PRSI.

Earning over €352.01 per week: 4% PRSI on all your earnings.

From October 2024 the 4% PRSI rate will increase to 4.1%

Tax and Social Welfare

Many Social Welfare payments are treated as taxable income. This means that if you, or your spouse/partner, earn any extra income your Social Welfare payment will use up either all, or some, of your tax credits. If you are claiming a taxable Social Welfare payment you must notify Revenue of any additional income either you or your partner/spouse have.

Main Taxable Social Welfare Payments:

Adoptive Benefit

lind Pension

· Carer's Allowance

· Carer's Benefit

· Death Benefit Pension

· Deserted Wife's Benefit

· Deserted Wife’s Allowance

· Disablement Pension

· Health and Safety Benefit

· Illness Benefit

· Invalidity Pension

· Incapacity Supplement

· Injury Benefit

· Jobseeker's Benefit (JB)

· Jobseeker's Benefit (Self-Employed)

· Maternity Benefit

· One-Parent Family Payment

· Partial Capacity Benefit

· Paternity Benefit

· Parent's Benefit

· Short-Term Enterprise Allowance

· State Pension (Contributory)

· State Pension (Non-Contributory)

· Widow’s, Widower’s or Surviving Civil Partner's (Contributory) Pension

· Widow’s, Widower’s or Surviving Civil Partner's (Non-Contributory) Pension

How Is Tax Paid?

Most employees are Pay As You Earn or PAYE workers. This means that any income tax you owe is deducted from your wages by your employer.

What Are Tax Credits and Tax Bands?

Once you start a job the Revenue Commissioners should send you a ‘Determination of Tax Credits and Standard Rate Cut-off Point Notice’. This notice gives you the information that will allow you to work out how much tax you will pay on your earnings.

The tax year runs from the 1st of January 2024 to 31st December 2024, in line with the calendar year.

The two main tax rates for the tax year that start on 1st January 2024 are 20% (standard) and 40% (higher).

The Tax Credit system: Under the ‘tax credit’ system your liability for tax is calculated on your total

gross income. You receive ‘tax credits’ based on your circumstances. These ‘tax credits’ are then deducted from your overall tax liability. The tax due is calculated by adding together any applicable tax credits and subtracting them from your overall tax liability. This is the way that it works:

1. Calculate your gross income.

2. Calculate your tax liability. (See Tax Rates and Bands in this chapter)

3. Add together any tax credits that apply to your circumstances.

4. Subtract the amount of your tax credits (step 3) from the amount of your tax liability (step 2) to identify your yearly tax bill.

5. Divide the result of step 4 by fifty-two to obtain your weekly tax bill.

You may also be able to claim other allowances depending on your circumstances, please check or go to www.revenue.ie.

The main Tax Credits in 2024 are

• Single Person’s Tax Credit €1,875

• Married Couple’s/Civil Partners Tax Credit €3,750

• Home Carer’s Tax Credit (maximum) €1,800

• Widowed Credit (without dependent children) €2,415

• Single Person Child Carer Credit (SPCCC) €1,750

• Employee Tax Credit (formerly known as PAYE Tax Credit) €1,875

PAYE

Pay As You Earn (PAYE) income tax is charged on a tax yearly basis (unlike PRSI and the USC) so your tax credits are averaged out over the tax year. If you take up a job at any stage in the tax year, you can still avail of your full annual allocation of tax credits. You cannot carry credits into the next year. Income from any source including employment, self-employment, pensions and some Social Welfare payments will be assessed for tax purposes.

Income Tax Rates and Bands: There are two main rates of income tax, the 20% standard rate and the 40% higher rate. To work out how much of your income will be taxed at 20% and how much will be taxed at 40% you need to look at the income tax bands:

• Single and widowed people without children: €42,000 @ 20%; balance @ 40%

• Single and widowed people with children qualifying for Single Person Child Carer Credit (SPCCC): €46,000 @ 20%; balance @ 40%

• Married couple/civil partners with one income: €51,000 @ 20%; balance @ 40%

• Married couple/civil partners with two incomes: up to €84,000 (Max) @ 20%; balance @ 40%

Once your income goes over a certain level, you will start paying tax at the higher rate of 40%. This level is called a “tax band”. Different tax bands apply to different types of household.