PAYE Taxpayers >> Social Welfare Benefits

Tags: State pensions, Tax Free, PAYE tax credit

The following benefits are not liable for tax:

  • Unemployment Assistance
  • Maternity Benefit
  • Children’s Allowance
  • Death Grant
  • Disability Allowance
  • Family Income Supplement

Apart from this all other benefits are liable for tax. The most common ones arising in practice will be Old Age and retirement pensions, Widows Pensions and Unemployment Benefits.
Special rules apply for unemployment benefit. The first €13 per week of benefit is not taxable. In addition Child Dependant Allowance paid with Unemployment Benefit is not liable for tax either. The Shorttime Working Benefit for those who are on a 3day week is exempt from tax.
For those in receipt of Disability Benefit the payment received for the first 6 weeks is not taxable and Child Dependent Benefits paid plus Disability Benefit are not taxable.

The individual in receipt of benefits is obliged to declare same to the Revenue. No tax is deducted at point of payment. This can lead to substantial tax underpayments for people in receipt of Old Age Pensions. If you have other income e.g. An Occupational Pension, which uses up all of your tax credits then the State Pension is liable for tax in full. Many people are not aware of this and if it is left uncorrected for a number of years a very substantial tax liability can arise.
If you are in receipt of the Old Age Pension you are entitled to the normal PAYE tax credit. This is an important point for people who have been selfemployed all their life and never in receipt of PAYE income. When you start drawing the State pension you are entitled to claim the benefit of the PAYE tax credit. For the year 2011 the PAYE tax credit is worth €1,650.

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PAYE Taxpayers