Universal Social Charge, All you Need to Know

HRHQ-Payroll-Outsourcing

By Anne Reilly, founder and CEO of PaycheckPlus

The USC was introduced in January 2011 as a charge payable on gross income including notional pay (on BIK) but before pension contributions. Since January 1st 2012, the calculation of USC has changed to the cumulative basis, similar to the way PAYE is calculated. The Tax Certificates issued by Revenue have been amended to include the USC COP’s. The employer is obliged to calculate USC strictly on the figures stated on the latest tax credit certificate issued by Revenue.

There is no liability where an individual’s annual gross income does not exceed €13,000 for the current tax year. In order for the exemption to apply it must be stated on the tax credit certificate. Where the income exceeds €13,000 the individual is liable to pay USC on the total income including the first 13,000 .Employees who hold a full medical card or those aged 70 years or over will only incur a maximum USC liability of 3% of their employment or pension income.

Medical card holders should contact their local Revenue Office to request a revised tax credit certificate. If a medical card holder was charged 5.5% USC in a previous pay period in the tax year, any refund of USC due will be automatically made through payroll assuming the tax credit certificate issued by Revenue to the employer indicates that USC is to be calculated on the cumulative basis.

Where an individual has more than one source of income, the USC Cut Off Points may be allocated between the various sources of income in any order they wish. Employees and pensioners should ensure that their tax certificate reflects their personal circumstances as employers are only permitted to take instructions from Revenue via the tax credit certificate.

USC standard Rates:

Rates of USC % Weekly Monthly Annual
USC Rate 1 1% €231 €1,001 €12,012
USC Rate 2 3% €359 €1,555.67 €18,668
USC Rate 3 5% €1,347 €5,837 €70,044
USC Rate 4 8% Balance Balance Balance

 

USC Reduced Rates:

Rates of USC % Weekly Monthly Annual
USC Rate 1 1% €231 €1,001 €12,012
USC Rate 2 3% Balance Balance Balance

 

The following are not liable to USC:

  • Tax exempt BIK’s for example the small benefit exemption up to the value of €500
  • Revenue approved salary sacrifice for example the Bike to Work scheme or travel pass
  • Legally enforceable maintenance payments to a separated spouse/civil partner