A summary of the new Universal Social Charge and its effects on individuals
The introduction of the Universal Social Charge (USC), a single charge consolidating and replacing the income and the health levy from 1 January 2011, was among the most significant announcements in the Irish Budget 2011. Despite initial indications by the minister in his 2011 Budget speech, PRSI remains a separate charge from the USC.
Who is liable and on what income?
All individuals are liable to the USC where their income exceeds €4,004 for the year. In addition to income chargeable to income tax, certain income exempt from income tax is included e.g. dividends from companies exempt from corporation tax and income covered by the artists exemption.
The USC applies on a similar basis to the income levy, which means that it is charged before allowances and reliefs are given. Lessors/passive investors will pay the USC on gross income before deduction for capital allowances. However, a deduction for capital allowances from the profit of a trade, profession or farming is allowed.
What income is exempt?
There are a number of sources of income which are exempt, the most noteworthy being deposit interest subject to DIRT, social welfare payments and similar types of payments. A detailed list is available from the Revenue's website, www.revenue. ie, inserting the following 'universalsocial- charge-faqs.pdf' into the search field.
Rates of USC
For individuals within PAYE the annual rates are:
How is the USC collected?
Employers are responsible for deducting the USC from salaries etc. and remitting it to the Revenue with the PAYE/PRSI liability. Self-employed individuals must make a payment of the USC along with their preliminary income tax payment.
USC and preliminary income tax 2011
The preliminary income tax payment for 2011 (due for payment on 31 October 2011) must include a payment in respect of the USC. If a taxpayer wishes to calculate this payment based on their 2010 income tax liability they must recalculate this to exclude the health and income levy and include the USC as if it had applied for that year. We recommend that you contact us regarding the appropriate payment to avoid any exposure to interest on underpayment of same.
We recommend that all individuals, particularly those with income outside of PAYE, should contact us to quantify their likely liabilities which are due for payment on 31 October 2011. We look forward to meeting with you to discuss any aspect of the USC and how it applies to you..
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
