2020 payments received:
Payments received in 2020 under the PUP are subject to income tax and universal social charge.
Individuals in receipt of PUP payments must complete an income tax return to receive their final statement of liability which will provide the final over or under payment for the year.
Revenue confirmed in September 2020 that PUP income tax and USC liabilities would become due at the end of 2020 and that the resulting liabilities could be discharged in one of two ways;
– Pay any underpayment in full via My Account
– Default option of discharging any underpayment arising due to the PUP payments over a four year period commencing in 2022 via a reduction in the annual tax credit entitlement.
As an example – Individual A has a €1,000 income tax underpayment for 2020.
This can be discharged as follows;
(1) Individual A can make payment of the €1,000 via My Account
(2) Revenue will reduce the individuals’ tax credits by €250 for the years 2022 to 2025 thereby recouping the underpayment via the PAYE system
2021 PUP payments:
In 2021 PUP payments will be taxes on a real time basis as follows;
The Department of Employment Affairs and Social Protection will notify Revenue on a weekly basis of the amount of PUP paid to each recipient.
Revenue will then collect any tax due by reducing the person’s tax credits and rate band. To do this Revenue will “annualise” the weekly amount of PUP.
The adjusted tax credits and rate band are then applied on a Week 1 basis and the revisions will be reflected in the Revenue Payroll Notifications issued by Revenue to the person’s employer.
This process in 2021 should ensure there are no underpayments at the end of year arising from PUP payments.