The Universal Social Charge (USC) is a tax that replaced both the income levy and the health levy (also known as the health contribution) since 1 January 2011.
You pay the USC if your gross income is more than €12,012 per year. (This limit was €4,004 in 2011 and €10,036 from 2012 to 2014.) Once your income is over this limit, you pay the relevant rate of USC on all of your income. It is calculated on a weekly or monthly basis.
It does not apply to social welfare or similar payments, and there are certain other exceptions: see “Income exempt from the USC” below.
It was announced in Budget 2016 that incomes of €13,000 (was €12,012) or less will be exempt from USC in 2016. Once your income is over this limit, you will pay the relevant rate of USC on all of your income. The rates and thresholds for USC will change as follows:
|Income up to €12,012||1.5%||Income up to €12,012||1%|
|€12,012.01 to €17,576.00||3.5%||€12,012.01 to €18,668.00||3%|
|€17,576.01 to €70,044.00||7%||€18,668.00 to €70,044.00||5.5%|
|Income above €70,044.01||8%||Income above €70,044.01||8%|
|Self-employed income in excess of €100,000.01||11%||Self-employed income in excess of €100,000.01||11%|
Medical card holders and people aged 70 years and over whose aggregate income does not exceed €60,000 will pay a reduced rate as follows:
These changes are subject to legislation.
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. The Universal Social Charge is payable on pension contributions.
You pay the Universal Social Charge if your gross income is more than €12,012 per year. Once your income is over this limit, you pay the USC on all of your income. For married couples or civil partners, each spouse or civil partner is treated individually by their employer or pension provider throughout the year.
Liability for the USC depends on the date of the payment rather than on when the income was earned.
Although you may have no liability to income tax based on your entitlement to tax credits or by use of losses or capital allowances you may still have a liability to pay the Universal Social Charge on your income.
Some sources of income, for example, from occupation of certain woodlands, profits from stallion fees, stud greyhound services fees and farmland leasing, patent royalty income and earnings of certain writers, artists and composers, are exempt from income tax but are liable to the Universal Social Charge.
You do not pay the Universal Social Charge if your total income for a year is under €12,012. (If you are 70 or over or a medical card holder under 70 and your aggregate income for the year is €60,000 or less you pay a reduced rate of USC.)
All Department of Social Protection payments, including Maternity Benefit and State pensions, are exempt from the Universal Social Charge. Similar payments, such as payments made as part of Community Employment schemes or the Back to Education Allowance, are exempt. Social welfare or similar payments made from abroad are exempt. Student grants and scholarships are also exempt.
Income where DIRT (Deposit Interest Retention Tax) has already been paid is exempt from the USC.
There are a number of other exemptions. These include:
There is a full list of exceptions in Revenue's Frequently Asked Questions document (pdf).
Statutory redundancy payments are exempt from the charge. Statutory redundancy payments amount to 2 weeks’ pay per year of service plus a bonus week subject to a maximum payment of €600 per week. In addition, redundancy payments above the statutory redundancy amount are exempt from the Universal Social Charge, up to certain limits. These limits are up to €10,160 plus €765 per complete year of service in excess of the statutory redundancy. This basic exemption can be further increased by up to €10,000 if the person is not a member of an occupational pension scheme.
The Universal Social Charge is charged on liable income after the statutory exemptions above, and after any additional deduction for Standard Capital Superannuation Benefit (SCSB).
How maintenance payments are treated for Universal Social Charge purposes depends on whether they are voluntary payments or legally enforceable payments.
Voluntary maintenance payments (payments paid under an informal arrangement):
Legally enforceable maintenance payments (payable under legal obligation):
In the case of a legally enforceable maintenance arrangement, where a separated couple has jointly elected to be treated as a married couple for income tax purposes, the spouse making the payments does not receive exemption from the Universal Social Charge on the portion of their income which they pay as maintenance. The spouse who receives the payments is not subject to the Universal Social Charge on the maintenance payments they receive.
An employer’s or pension provider’s contribution to an approved retirement benefit scheme is not liable to the Universal Social Charge, but an employee's contributions are.
If an employer or pension provider makes a contribution on your behalf to your Personal Retirement Savings Account (PRSA) it is treated as a taxable benefit-in-kind. As the Universal Social Charge treatment follows the income tax treatment, the employer or pension provider’s contribution to the personal retirement savings account will also be subject to the Universal Social Charge.
Occupational pensions are subject to the Universal Social Charge, but Department of Social Protection pensions or similar pensions from abroad are not. The USC is only payable on lump sum pension payments on the portion over €500,000.
If your income is less than €12,012 you pay no Universal Social Charge (USC). (This limit was €4,004 in 2011 and €10,036 from 2012 to 2014.) Once your income is over this limit, you pay the relevant rate of USC on all of your income.
|1.5%||Up to €12,012|
|3.5%||From €12,012.01 to €17,576.00|
|7%||From €17,576.01 to €70,044.00|
|8%||From €70,044.01 to €100,000.00|
|8%||Any PAYE income over €100,000|
|11%||Self-employed income over €100,000|
|1.5%||Income up to €12,012|
|3.5%||All income over €12,012|
Reduced rates of USC apply to:
‘Aggregate’ income for USC purposes does not include payments from the Department of Social Protection.
You must hold a full medical card (including a Health Amendment Act Card) to qualify for the reduced rate. 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. If a person reaches 70 years at any stage during the year they will benefit from the maximum 3.5% rate for the whole year.
From 2012 people who hold Northern Ireland medical cards will no longer be treated as holding a full medical card and will therefore not qualify for a reduced rate. (In the tax year 2011 Revenue treated ‘frontier workers’ who travelled from another EU Member State (for example, Northern Ireland) to work in this State as being automatically entitled to a full medical card. This is no longer the case.)
A surcharge of 3% applies people who have income from self-employment above €100,000, regardless of age.
Note: Bonuses paid to employees of the five financial institutions that have received financial support from the State are chargeable to the USC at the rate of 45% on the full amount where the bonus exceeds €20,000 in a single tax year.
An individual who is earning €50,000 per year will pay the Universal Social Charge at a rate of 1.5% on the first €12,012 (which comes to €180.18), 3.5% on the next €5,564 (which comes to €194.74) and 7% on the balance of €32,424 (which comes to €2,269.68). In total this person will pay €2,644.60 per year.
You do not pay the Universal Social Charge if your total income for a year does not exceed €12,012. For example, an individual who is earning €12,012 per year will not pay any Universal Social Charge, while an individual who is earning €12,100 per year will pay 1.5% on that €12,012 (which comes to €180.18) and 3.5% of the remaining €88 which comes to €3.08). This person will pay a total of €183.26 per year.
A person who has self-employed income of €112,000 per year, will pay the Universal Social Charge at a rate of 1.5% on the first €12,012 (which comes to €180.18), 3.5% on the next €5,564 (which comes to €194.74), 7% on the next €52,468 (which comes to €3,672.76), 8% on the next €29,956 (which comes to €2,396.48) and 11% on the next €12,000 (which comes to €1,320). In total this person will pay €7,764.16 per year.
From 1 January 2012, the deduction of Universal Social Charge changed from a week 1 basis to a cumulative basis - similar to the way in which PAYE is deducted. Employers and pension providers are responsible for deducting the Universal Social Charge from their employees’ salaries. They deduct and pay it to Revenue on behalf of employees.
Employer Tax Credit Certificates (P2Cs), as well as displaying PAYE rates and cut-off points, also show USC rates and cut-off points. 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.
Details of the Universal Social Charge should be recorded separately on your payslip.
From 2012, employers will no longer be providing Universal Social Charge Certificates. The P60 (for the year ending 31 December 2012) has been revised with additional fields to cater for cumulative USC.
The 2011 (year ending 31 December 2011) P60 includes two fields to report Universal Social Charge (gross pay for Universal Social Charge purposes and the amount of Universal Social Charge deducted.)
If you change jobs your employer will give you a form P45. This will show your pay, tax, USC, and PRSI details for the year up to the date you leave. You should give this P45 to your new employer so that the correct amount of tax and USC is deducted from your pay.
Self-employed people make a payment of USC along with their preliminary tax payment, and any balance will be collected when the final assessment issues.
Where the Universal Social Charge has been applied throughout the year but you are ultimately liable at either a lower rate or are exempt because you have not exceeded the thresholds at the end of the year, you will have overpaid the charge. In this situation you will be due a refund of some or all of any USC paid. You may also be due a refund if you turn 70 years of age during the year or if you receive a medical card during the year.
If you have been in continuous employment with an employer or receiving a pension throughout the year in question (that is, from 1 January to 31 December), your employer or pension provider may refund any overpayment of USC deducted at the end of the year. If you are due a refund because you have received a medical card, the refund should be made by your employer immediately rather than waiting until the end of the year.
Where you have not been in continuous employment with an employer or receiving a pension throughout the year in question, Revenue will deal with any refund of USC due at the end of the year.
From 1 January 2012
With effect from 1 January 2012, for PAYE taxpayers, the deduction of USC changed from a pay period by pay period basis to a cumulative basis, similar to the way PAYE is deducted. This means that your USC deductions are spread out evenly over the year and the correct amount of USC is deducted at the end of the year. Overpayments of USC should not arise. If, however, at the end of the year you think you have overpaid USC, you can review your USC and tax on PAYE Anytime. This service is now available through Revenue's myAccount Service. You can also contact your local Revenue office for a review of your USC deductions.
Employers and pension providers are responsible for deducting the Universal Social Charge from their employees’ salaries. They will deduct and pay it to Revenue on behalf of employees. Revenue will notify employers of the USC rates and thresholds to be applied for all employees. You should inform Revenue of any changes in your circumstances (for example, if you get a medical card).
If you have a question relating to this topic you can contact the Citizens Information Phone Service on 0761 07 4000 (Monday to Friday, 9am to 8pm) or you can visit your local Citizens Information Centre.