Taxation of social welfare payments
All income in Ireland is generally subject to taxation. Your social welfare payment may or may not be deemed taxable but even if your social welfare payment is taxable, you may not actually have to pay tax on it. If you are getting a social welfare payment you get an Employee Tax Credit (formerly known as a PAYE tax credit) in addition to your normal tax credits. This means, if a social welfare payment is your only source of income you may not pay tax because your tax liability does not exceed your tax credits. The Employee Tax Credit is given to the person claiming the social welfare payment and not to the adult dependant even if the Increase for a Qualified Adult is paid directly to the dependant.
Social welfare payment and another income
If you have a social welfare payment and another source of income, you may have to pay tax. In this case, your taxable social welfare payment and your other income are added together. You are taxed on the total amount. There is no mechanism for taxing social welfare payments at source (before it is paid to you). Your non-social welfare income determines how tax due is paid. Social welfare payments are taxed by reducing your tax credits and rate band.
For example, you are getting a social welfare pension and an occupational pension. Your occupational pension is taxed through the Pay-As-You-Earn (PAYE) system in the same way as a wage or salary. This means that you get your tax credits in the normal way. In order to tax your social welfare pension, your annual tax credits are reduced by the tax liability on your social welfare pension. You then effectively pay tax on both the pensions, but it is collected from the occupational pension. For higher incomes, the standard rate cut off point will also be reduced. The technical term for this is coding in of credits. The same arrangement applies if you have income from a job and a social welfare payment. If your social welfare payment was not coded in, you would have to pay tax as a self-employed person and in a lump sum by 31 October each year.
If your other source of income is not taxed through the PAYE system, for example, if you are self-employed, have an occupational pension from abroad or have investment income, then you are classed as a self-employed person and your tax is payable annually by 31 October each year.
Social security pensions from abroad
If you have a social security pension from abroad, it is also generally taxable in Ireland. The tax is payable annually unless you have a source of income that is subject to PAYE. Certain foreign pensions that would be exempt from tax if you were resident in the country paying the pension, are however also exempt from tax in Ireland.
Taxation of specific social welfare payments
Maternity Benefit, Paternity Benefit, Adoptive Benefit and Health and Safety Benefit are taxable. Universal Social Charge and PRSI are not payable. The actual rate of tax you will pay will depend on your personal circumstances and the tax reliefs and tax credits you are claiming. The information given here applies in exactly the same way to Adoptive, Paternity and Health and Safety Benefit.
The Department of Employment Affairs and Social Protection (DEASP) will pay Maternity Benefit without any deduction of tax. However, the DEASP will notify Revenue of the amount of Maternity Benefit to be taken into account for income tax purposes.
If you are self-employed and pay your tax through the self-assessment system you should include details of any Maternity Benefit received in your annual tax return.
If you pay tax through the PAYE system Revenue will, where possible, automatically reduce your annual tax credits and rate bands to account for the tax payable on your Maternity Benefit (see 'Further information' below for examples).
You can read more detailed information and examples of how Maternity Benefit is taxed on Revenue's website. You can also read our case study.
Maternity Benefit before 1 July 2013
If you were getting Maternity Benefit up to and including 30 June 2013 you may be entitled to a tax and PRSI refund if your Maternity Benefit is paid to your employer and your employer continues to pay your normal weekly wage. If this is the case, when your Maternity Benefit has finished, you can write to the Maternity Benefit Section or contact the Maternity Benefit Section online to request an MB21 Statement, which you should then forward to your tax office to get a tax refund. To get a PRSI refund, you should complete the Refund of PRSI Contributions Application Form and send it to the PRSI Refunds Section.
Illness Benefit and Injury Benefit
If you are absent from work due to illness and you get (or your employer gets on your behalf) Illness Benefit or Injury Benefit, Revenue will take account of the amount of Illness or Injury Benefit paid when they adjust your tax credits or review the tax affairs of your spouse or civil partner. No PRSI or USC is payable. The Department of Employment Affairs and Social Protection notifies Revenue of the amount of taxable Illness or Injury Benefit an employee is entitled to and the date the payment started. Since January 2018, employers are no longer notified by the DEASP of the amount of Illness or Injury Benefit you are getting.
Jobseeker’s Benefit and One-Parent Family Payment
If you work and get Jobseeker’s Benefit (JB) the taxable part of your JB is collected by adjusting your tax credits and standard rate cut off point to account for the tax payable. One-Parent Family Payment is taxed in the same way. No PRSI or USC is payable.
What social welfare payments are taxable?
Jobseeker's Benefit is generally taxable, but the first €13 each week is exempt from tax. Jobseeker's Benefit payable to short-time workers is not taxable.
Increases for Qualified Children payable with Jobseeker's Benefit, Illness Benefit and the Occupational Injuries Scheme (Injury Benefit, Disablement Pension and Incapacity Supplement) are not taxable.
Other than the cases above, if your social welfare payment is taxable, any increase in your payment for your adult dependant and child dependants is also taxable.
Guardian's payments, which are payments made for the benefit of an orphan, are taxable. However a guardian's payment is regarded as the beneficial property of the child and is therefore assessable against their income (if any), not against the income of the person getting the guardian's payment.
Payments that are not taxed
|Back to Work Family Dividend||Not taxed|
|Child Benefit||Not taxed|
|Disability Allowance||Not taxed|
|Disablement Gratuity (lump sum payment)||Not taxed|
|Domiciliary Care Allowance||Not taxed|
|Farm Assist||Not taxed|
|Working Family Payment (formerly Family Income Supplement)||Not taxed|
|Fuel Allowance||Not taxed|
|Household Benefits Scheme||Not taxed|
|Jobseeker's Allowance||Not taxed|
|Jobseeker's Benefit (paid to systematic short-term workers)||Not taxed|
|Jobseeker's Transitional payment||Not taxed|
|Pre-Retirement Allowance||Not taxed|
|Supplementary Welfare Allowance||Not taxed|
|Widowed or Surviving Civil Partner Grant||Not taxed|
|Constant Attendance Allowance (payable with Disablement Pension)||Taxable|
|Deserted Wife's Benefit||Taxable|
|Deserted Wife’s Allowance||Taxable|
|Death Benefit Pension||Taxable|
|Disablement Pension||Taxable (except for child increases)|
|Guardian's Payment (Contributory)||Taxable (on child's income)|
|Guardian's Payment (Non-Contributory)||Taxable (on child's income)|
|Health and Safety Benefit||Taxable (since 1 July 2013)|
|Illness Benefit||Taxable (except for child increases)|
|Incapacity Supplement||Taxable (except for child increases)|
|Injury Benefit||Taxable (except for child increases)|
|Jobseeker's Benefit and Short-Term Enterprise Allowance||Taxable (first €13 per week excluded)|
|Maternity Benefit||Taxable (since 1 July 2013)|
|One-Parent Family Payment||Taxable|
|Partial Capacity Benefit||Taxable|
|State Pension (Contributory)||Taxable|
|State Pension (Non-Contributory)||Taxable|
|Widow’s, Widower’s or Surviving Civil Partner's (Contributory) Pension||Taxable|
|Widow’s, Widower’s or Surviving Civil Partner's (Non-Contributory) Pension||Taxable|
The Back to Work Allowance, Back to Work Enterprise Allowance and Back to Education Allowance are not taxable. The Short-Term Back to Work Enterprise Allowance is taxable. The Vocational Training Opportunities Scheme (VTOS) is not taxable. The Water Conservation Grant (paid annually to households registered with Irish Water) is exempt from income tax.
You may get an increase in your social welfare payment, if you are living alone. If your social welfare payment is taxable, then the Living Alone Increase is taxable. If your social welfare payment is not taxable, then your Living Alone Increase is not taxable.
Where to apply
No tax is deducted at source by the Department of Employment Affairs and Social Protection. All enquiries about your tax liability should be addressed to your local tax office.
Examples of how Maternity Benefit is taxed
If you pay tax through the PAYE system you will probably fall into one of the following 3 categories:
1. You are paid your full or partial salary by your employer and your Maternity Benefit is paid directly to them
Revenue will reduce your tax credits and rate band to account for the tax payable on your Maternity Benefit and in this way collect the tax due. Revenue will then send a revised tax credit certificate to your employer. Your employer should only deduct tax, USC and PRSI on the difference between the salary paid and Maternity Benefit.
2. You are paid your full or partial salary by your employer and your Maternity Benefit is paid directly to you.
Revenue will reduce your tax credits and rate band to account for the tax payable on your Maternity Benefit and your employer should only deduct tax, USC and PRSI only on the amount of salary actually paid by them.
3. You do not get any salary while on maternity leave and your Maternity Benefit is paid directly to you
Revenue will reduce your tax credits and rate band to account for the tax payable on your Maternity Benefit. They will then send a revised tax credit certificate to your employer. If your only income is Maternity Benefit you will probably pay very little or no tax (since your total tax credits will probably exceed your total tax liability).
If you are not entitled to any pay on the usual pay day, you may contact your employer to request repayment of any tax that might be due. Alternatively, when you go back to work after maternity leave, any refund of tax which may be due can be calculated.
You can find more information in our Case Study: Taxation of Maternity Benefit.