Remember the outcry that ensued when Revenue declared that pensioners could face tax bills on their state pension payments?
Yes, when you receive a welfare benefit from the Department of Employment Affairs and Social Protection, depending on your income, you could find that this is subject to income tax (universal social charge and PRSI typically don’t apply to social welfare payments).
But not all welfare payments are treated the same, and before Christmas, Revenue clarified the welfare payments you can receive without ever being subject to income tax on the benefit. This follows an amendment in Finance Act 2018, which sought “to put beyond doubt” that certain welfare payments are exempt from tax.
So what payments must you pay tax on? And which are exempt?
Payments liable to tax
So let’s look at the ones you must pay tax on first. As we know clearly know, if you get the state
pension
(contributory or non-contributory), which is paid at a rate of up to € 243.30 a week, and your income is in excess of €18,000, then you may find that if you’re private pension income isn’t being taxed, you could be subject to tax on the state pension. This also applies to those receiving the blind person’s pension, widow/widower’s/surviving civil partner pension, invalidity pension and death benefit pension. The living alone allowance, which can increase the aforementioned payments by €9 a week, is also subject to tax.
Tax also applies - where the income is high enough - to
c
arer’s allowance
and benefit; deserted wife’s allowance and benefit; occupational injury benefit; health and safety benefit; illness benefit; island allowance; occupational injury; partial capacity and rural social scheme.
A host of
parental related benefits
are also subject to tax, which means that if your employer tops up your maternity/paternity pay, you may be taxed on your state benefit of €240 a week or so. The benefits that are liable to tax are maternity/paternity, adoptive benefit and one parent family benefit.
And if you’re looking for work but have income from other sources, you could find that you end up paying tax on
jobseeker’s benefit
and community employment schemes.
As some of these payments (such as the state pension) are paid directly to you, the onus is on you to notify Revenue and declare this income. The DEASP notifies Revenue of other benefits, such as maternity and invalidity pension, so you don’t have to do anything for these as Revenue will work out tax owed.
