Taxation of the PUP Pandemic Unemployment Payment.

Is The Pandemic Unemployment Payment Taxable?

Yes, Revenue has confirmed that it will treat the PUP Pandemic Unemployment Payment as taxable income .
Jobseekers Benefit is taxable and has been for years. We expect the taxation of the Covid unemployment payment to be done in a similar way.

PUP is NOT liable to USC or PRSI – (same as Jobseekers)

Why is the PUP 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. For instance, someone who worked through the pandemic, earning €350 a week, shouldn’t be expected to pay more tax on that income than someone who didn’t work.

How Much Tax Will You Have to Pay?

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.
If you were getting the PUP all year from March 2020 – the amount of tax due will be lower than if you have returned to work. However
, if your total earnings plus the Covid payment in 2020 are less than €16500 – you won’t be liable for any income tax at all .((Single person)

After returning to work – if there is any income tax due, Revenue won’t normally collect it in one lump sum. Revenue will review your tax situation at the end of 2021 and work out any under or overpayment. You could even get a rebate if you have overpaid tax.

All PAYE taxpayers will get a Preliminary End of Year Statement in their online MyAccount from January 15th, 2021. It will show the amount of TWSS and/or PUP payments that you received. It will also show if you have paid the correct amount of tax and USC for the year.

Revenue has confirmed that employees will be given the opportunity to fully or partially pay any outstanding income tax liability through the Payments/Repayments facility in myAccount. Otherwise, Revenue will collect the liability, interest-free, by reducing the employee’s tax credits over 4 years starting in January 2022.”
There are some examples in the table below of how much tax might be due.

Sample Calculations

Taxation of PUP for 2020 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%

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

For most full-time workers the tax due 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 are less than €16500 – you won’t be liable for any income tax.

For Self-Employed claiming the Covid Payment: They will just need to enter the Covid payments as a taxable social welfare payment on their tax return for 2020. Revenue will include this in their income and assess the tax the total income for the year.

PUP Taxation 2021

The process for the taxation of the Pandemic Unemployment Payment has been changed. From 1 January 2021 PUP payments earned in 2021 are taxable in “real-time”. This does not mean that you will have tax deducted from your PUP payment every week – it just means your tax credits will be adjusted. More on that from Revenue

When someone on PUP returns to work in 2021 – the Dept of Social Protection should inform Revenue and the tax cert will be adjusted again. There is a strong possibility that a worker’s first wage after returning to work will be overtaxed – because of the delay in changing the tax cert and employers having time to action it. This could well mean that for many people – they will see 20% or more of their first wage being taken in tax. This should hopefully be sorted by the second wage after returning to work.

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.

More about Taxation of Welfare Benefits on Gov IE