Taxation of the Covid Unemployment Payment.

Is The Covid Unemployment Payment Taxable?

Yes, Revenue has indicated that it will treat the COVID-19 Pandemic Unemployment Payment as taxable income .

Jobseekers Benefit has been taxable for years – so we expect the Covid payment to be treated by Revenue in a similar way.

Jobseekers Benefit is NOT liable to USC or PRSI – so we expect the €350 a week Pandemic payment to be the same.

Why is it Taxable ?
The Dept of Social Protection say that “the treatment of social welfare short-term payments as income for income tax purposes is essentially a matter of equity. It ensures that one person does not pay less tax than another person simply because the first person’s income includes a social welfare payment and the second person’s income does not. “

It does make sense – if someone worked all through the pandemic and got paid €350 a week – they shouldn’t be expected to pay more tax on their income than someone who didn’t work. Both should be taxed the same.

How Much Tax Will You Have to Pay?

When you return to work – if there is any income tax due it won’t normally be collected in one big lump sum. Revenue will usually review your tax situation at the end of the year and work out any under or overpayment. You should get a rebate if there you have overpaid tax.

If there is an underpayment they should just adjust your annual tax credits and rate band for 2021 and you will be informed of any changes to them. That’s what usually happens with Jobseekers Benefit.
If we find out that Revenue have different plans for the Covid payment – we will update this post.

The exact amount of income tax due will depend on your total income for the year, your tax situation (married/single) and how long you were on the Covid Unemployment Payment.

Assuming that it is treated in a similar way to Jobseekers Benefit – this is what should happen.

Here are some examples in the table below of how much tax will be due .

These figures are based on a single person (not self employed)

We expect that any underpaid income tax will be spread across 2021 – so hopefully it will be less noticeable.
For most full time workers the extra tax should work out between 20% and 40% of the total Covid payments received.
The higher your earnings – the bigger percentage you will pay back.

If your total earnings plus the Covid payment in 2020 come to less than €16500 – you won’t be liable for any income tax.

Sample Calculations
Taxation of Covid PUP based on 13 weeks of Covid payments to a single person.

Normal Annual Gross
Wage in 2020
Total Wages received in 2020 (9 months )€15000€16500€24000€30000€37500
Income Tax Due on 9 months Wages alone.NilNil€1500€2700€4640
Total 2020 Combined Income 9 month wages + 3 Months Covid€19550€21050€28550€34550€34550
Income Tax due on combined
income of 13 weeks
Covid Payments and 39 weeks of wages.
of 13 weeks (€4550)
Income Tax
Underpaid Tax As a % of total Covid Payment13.4%20%20%20%40%

For Self Employed people claiming the Covid Payment – it will just be a matter of entering the Covid payments as a taxable social welfare payment on your tax return for 2020. They will be included in your income and your tax will be assessed on your total income for the year.

Is The Covid Wage Subsidy Taxable?

Yes it is. It will be subject to USC and Income Tax eventually – but not while it is being paid out. It will not be subject to PRSI
You can see more details about Tax and the Wage Subsidy Here.