The Universal Social Charge (USC) is a tax on income 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 €13,000 per year. (This limit was €10,036 from 2012 to 2014 and €12,012 in 2015). 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.
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 €13,000 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 €13,000. (If you are aged 70 or over or a medical card holder aged 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. From 1 January 2016, employer contributions to your Personal Retirement Savings Account (PRSA) are no longer subject to USC. Up to 31 December 2015, these contributions were subject to USC.
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 €13,000 you pay no Universal Social Charge (USC). (This limit was €10,036 from 2012 to 2014 and €12,012 in 2015.) Once your income is over this limit, you pay the relevant rate of USC on all of your income. For example, if you have income of €13,000 you will pay no USC. If you have income of €13,001 you will pay 0.5% on income up to €12,012 and 2.5% on income between €12,012 and €13,001.
|0.5%||Up to €12,012|
|2.5%||From €12,012.01 to €18,772|
|5%||From €18,772.01 to €70,044|
|8%||From €70,044.01 to €100,000|
|8%||Any PAYE income over €100,000|
|11%||Self-employed income over €100,000|
|0.5%||Income up to €12,012|
|2.5%||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 2.5% rate for the whole year.
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.
A surcharge of 3% applies to people who have income from self-employment above €100,000, regardless of age.
Note: Bonuses paid to employees of the 5 financial institutions that have received financial support from the State are chargeable to the USC at the rate of 45% on the full amount if the bonus is more than €20,000 in a single tax year.
A person who is earning €50,000 per year will pay the Universal Social Charge at a rate of 0.5% on the first €12,012 (which comes to €60.06), 2.5% on the next €6,760 (which comes to €169.00) and 5% on the balance of €31,228 (which comes to €1,561.40). This person will pay €1,790.46 in 2017.
You do not pay the Universal Social Charge if your total income for a year does not exceed €13,000. For example, a person who is earning €13,000 per year will not pay any Universal Social Charge, while a person who is earning €13,100 per year will pay 0.5% on €12,012 (which comes to €60.06) and 2.5% on the remaining €1,088 which comes to €27.20). This person will pay a total of €87.26 in the year.
A person who has self-employed income of €112,000 per year, will pay the Universal Social Charge at a rate of 0.5% on the first €12,012 (which comes to €60.06), 2.5% on the next €6,760 (which comes to €169.00) 5% on the next €51,272 (which comes to €2,563.60), 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 €6,509.14 in the year.
Universal Social Charge is deducted on 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. The total amount of USC paid should be shown on your P60 each year.
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.
For PAYE taxpayers, USC is deducted on 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. The Phone Service will operate Monday to Friday, 9am to 6pm during January 2017. You can also visit your local Citizens Information Centre.