Guide to the Universal Social Charge (USC) 2012

    INTRODUCTION:

    This time last year the Universal Social Charge (USC) was introduced. Put simply, it is a charge on your total earnings. It replaced the Income Levy and Health Levy that had previously been charged. It is deducted from your earnings, just like your PAYE taxes, before you are paid. The charge also applies to pensioners and their income.

     

    It sounds complicated ... but in this newsletter we’ll explain the Universal Social Charge (USC) in plain, honest language and help you to understand how it is calculated and how your personal circumstances can affect what rate of USC you pay.

    HOW DOES MY EMPLOYER KNOW HOW MUCH TO DEDUCT?

    The Revenue Commissioners have issued a Tax Certificate for you to your employer. This certificate details the USC rates and Cut-Off Points (COP) in addition to the standard information such as your tax credit, income tax rates and Standard Rate Cut-Off Point.  Your employer uses the information on this Certificate to calculate your how your wages are taxed and is legally obliged to deduct your taxes and submit them to Revenue.

    SO HOW IS IT CALCULATED?

    If you earn less that €10,036 you do not have to pay the Universal Social Charge. However as soon as you earn over €10,036 your entire wage, including the first €10,036  is liable for the Universal Social Charge.  The rate charged is on a sliding scale:

    Rates of USC     Weekly Fortnightly Monthly
    USC Rate 1 2% USC Rate 1 COP €193.00 €386.00 €   837.00
    USC Rate 2 4% USC Rate 2 COP €308.00 €616.00 €1,335.00
    USC Rate 3 7%        

     

    SO WHAT DOES THIS MEAN FOR MY EARNINGS?

    Here’s a guide based on weekly salary with the annual salary beside it as a quick reference ...

    I Earn ...

    per week

    Equivalent Annual Salary* I pay USC at the following rates ... Calculation Total Due
    €180 €9,360.00 0% as I under the €10,036 threshold - €0.00
    €193 €10,036.00 2% on €193.00 €3.86 €3.86
    €280 €14,560.00 2% on first €193 and

    4% on the €87 balance

    €3.86

    €3.48

    €7.34
    €380 €19,760.00 2% on first €193 and

    4% on €115 between €193 and €308 &

    7% on the €72 balance €308 and €380

    €3.86

    €4.60

    €5.04

    €13.50
    €600 €31,200.00 2% on first €193 and

    4% on €115 between €193 and €308 &

    7% on the €292 balance €308 and €380

    €3.86

    €4.60

    €20.44

    €28.90

    *For those earning over €100,000 the USC rate is 10% on all earnings over €100,000. 

    The unavoidable fact is that most employees will pay USC on all of their income from their first day in employment, unless the employer has received a tax credit certificate indicating an exemption from USC.


    PENSIONERS AND MEDICAL CARD HOLDERS:

    The Universal Social Charge is also payable on pension income however for those over 70 years of age the rate charged is capped at a maximum of 4%. This also applies to all employees who hold a full Medical Card. If you are an employee with a full Medical Card or a pensioner aged 70 years or over these are the USC rates and Cut-Off points that apply to you:

     

    Rates of USC     Weekly Fortnightly Monthly
    USC Rate 1 2% USC Rate 1 COP €193.00 €386.00 €   837.00
    USC Rate 2 4% USC Rate 2 COP      

     

    If you are the holder of a full Medical Card you should contact your Local Revenue Office to request a revised tax credit certificate. To find your local office visit www.revenue.ie and enter your PPS number into the “Contact Locator” to get full details.

    If you are a full Medical Card holder and you were incorrectly charged USC at the 7% rate in the past, this will be corrected through your payroll when the new certificate is received by your employer. You need to contact Revenue to request the revised certificate. When you are requesting your amended certificate you need to ask them to ensure that your USC is calculated on a cumulative basis.

    I HAVE MORE THAN ONE INCOME. HOW IS THE USC CALCULATED?

    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. To do this you need to contact your Local Revenue office and instruct them as to how you want your USC allocated.

     

    I RECENTLY CHANGED JOBS – DO I HAVE TO DO ANYTHING?

    If you have recently changed employers if is important to contact Revenue to check your allowance is being allocated against your new employment. If your previous employer had not issued your P45 or if there was an error when your previous employment was being terminated it could mean your allowance was not transferred to your new employment. This is easily corrected by contacting Revenue.

    CONTACT REVENUE - 2 IMPORTANT REASONS ...

    Employers are only permitted to take instructions from Revenue via the tax credit certificate. You need to check that your tax credit certificate reflects your personal circumstances and if not then you need to contact Revenue to get your certificate adjusted. This applies to pensioners as well as employees.

    Employers are only permitted to exempt employees from the USC where the latest tax credit certificate received from Revenue indicates an exemption from USC. If your Cut-Off Point is less than €10,036.00 and you have only one source of income, you should contact Revenue to have your tax certificate adjusted.

     

    EXEMPTIONS FROM USC:

    There are certain payments received by individuals and employees that are exempt from the USC. These include:

    • All Department of Social Protection payments
    • Reimbursement of actual expenses incurred by an employee on behalf of their employer,
    • Payment of travel or subsistence rates which do not exceed Revenue approved rates,
    • Statutory redundancy and tax exempt termination payments,
    • Payments made to employees, including Directors, for whom the employer has been issued with a PAYE Exclusion Order, regardless of the country of residence of the employee.
    • Employer contributions made to an approved retirement benefit scheme (occupational pension scheme).

     

    If you purchase a Travel Pass through your employer or have taken up the Cycle-To-Work scheme, the salary you pay towards those expenses is not liable to the USC.

    REPAYMENT OF USC/INCOME LEVY TO RESIDENT EMPLOYEES WORKING ABROAD ...

    Revenue have changed their position on how people with a PAYE Exclusion Order are treated when it comes to USC. If you were tax resident in Ireland but working outside Ireland in 2011 and paid the USC, you should apply to Revenue for repayment of any USC deducted and paid over to Revenue. 

    In addition, if you were tax resident in Ireland but working abroad and had the Income Levy deducted from your pay, you should also apply to Revenue for repayments of any Income Levy deducted and paid over to Revenue.

     

    CROSS BORDER WORKERS: USC & MEDICAL CARD ENTITLEMENTS

    Cross border workers fall into several categories, the most common being “Posted Workers” and “Frontier Workers”. 

    • A Posted Worker is someone who is assigned by their employer to work in another EU state for a period of up to 24 months.
    • A Frontier Worker is someone who is resident in one Member State and works in another Member State and returns home at least once a week.

     

    Posted Workers: are subject to the Social insurance rules in their home country for the first 2 years of an assignment to another EU State.  If you are a posted worker and you are not subject to Irish PRSI you are entitled to a Full Medical Card. You should complete a Form A1 and a Form S1 (available from the Special Collections Unit, Department of Social & Family Protection) and present it to the HSE to obtain this Medical Card.

    Frontier Workers: are resident in another Member State (e.g. Northern Ireland) and travel to work in the State on a daily/weekly basis. Frontier workers are generally subject to Irish social insurance (PRSI). With effect from 1st January 2012, if you are a Northern Ireland resident or if you are entitled to free healthcare in Northern Ireland you will no longer automatically be exempt from the 7% rate of USC.  Such individuals will be liable to USC at 2%, 4% and 7% as appropriate. If you feel you qualify for a Medical Card in Ireland, you should contact the HSE (visit their website: www.medicalcard.ie).

    MORE INFORMATION

    It is not unusual for a newsletter on personal taxation to make you think about other issues relating to your personal finances. Here are some useful sources of further information:

    Revenue Commissioners                              www.revenue.ie (and visit the Personal Tax Section)

    Paycheck Plus FAQ Section                          www.paycheckplus.ie/information-centre

    If you have a more complex question, please contact your company Accounts/Finance office who will submit your question to our award-winning team at Paycheck Plus. We are always happy to provide professional advice to help you understand the taxation and calculation of your salary!

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