Taxation of the Covid Unemployment Payment.

Is The Pandemic Unemployment Payment Taxable?

Yes, Revenue has indicated 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.

Jobseekers Benefit is NOT liable to USC or PRSI – therefore we expect Revenue to do the same with the Pandemic payment.

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, won’t pay more tax on that income than someone who didn’t work.

How Much Tax Will You Have to Pay?

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 the year and work out any under or overpayment. You could even get a rebate if you have overpaid tax.

Revenue has confirmed that employees will be given the opportunity to fully or partially pay any outstanding income tax liability ity 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.”

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 Revenue tax thePUP (Pandemic Unemployment payment) in a similar way to Jobseekers Benefit – this is what should happen.

There 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)

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.
However , if your total earnings plus the Covid payment in 2020 are 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 claiming the Covid Payment: They will just 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.

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

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