Taxation of the Pandemic Unemployment Payment (PUP)

Taxation of the Pandemic Unemployment Payment (PUP). Gallagher Keane Chartered Accountants

Taxation of the Pandemic Unemployment Payment (PUP)

During 2020, the payment of the PUP was not taxable at the time of receipt from the Department of Social Protection. This ensured that individuals could register for and start to receive PUP payments quickly. In September 2020, Revenue announced that PUP tax liabilities would become due at the end of 2020.  

The tax liability could either be: 

  • Collected interest free, by reducing the employee’s tax credits over four years starting in January 2022. 
  • Fully or partially pay any Income Tax and Universal Social Charge liability through the payments/repayment’s facility in MyAccount. Where the liability is partially paid the balance could be collected interest free over four years.  

Taxation of PUP Received in 2020 

In January 2021, Revenue made a Preliminary End of Year Statement available to you. The Preliminary End of Year statement shows the following. 

  • Details of any income received and reported by your employer or employers. 
  • Information on the amount of PUP you received.  
  • A Preliminary Calculation of Your Income Tax and Universal Social Charge for 2020.  
  • Whether your tax position is balanced, underpaid, or overpaid for the year.  

What is Required 

You have an opportunity to update your personal record in myAccount. This can be done by completing an Income Return to declare any additional income and claim any additional tax credits due.  

Income Tax Due  

If you have been receiving the PUP and you owe Income Tax, you can either fully or partially pay any liabilities. This can be completed using the ‘Payments/Repayments’ facility in myAccount. Alternatively, Revenue will collect the full or any remaining liability, interest free, by reducing your tax credits over four years (2022 until 2025). The reduction of tax credits will start in January 2022.  

Taxation of PUP in 2021 

In contrast to 2020, PUP is taxable in real-time during 2021. This means you are taxed when you are paid. PUP payments in 2021 are treated like other Department of Social Protection taxable payments. This process ensures tax is collected on the payment at the right time and limits any additional liabilities at the end of the year.  

The Department of Social Protection informs Revenue on a weekly basis of the amount of PUP paid to each recipient. This means that any tax due is collected by reducing the person’s tax credits and rate band. To do this, Revenue annualises the weekly amount of PUP. This is calculated by multiplying the weekly amount by 52. The annual tax credits and rate band are reduced by this amount. The adjusted tax credits and rate band are applied on a week 1 basis. The revisions are shown on the employee’s Tax Credit Certificate. A revised Revenue Payroll Notification is made available to their employer. In most cases there will be no additional tax liability at the end of 2021.  

Process When PUP Payments Have Ended 

The adjusted tax credits and rate band only apply for the duration of the PUP. They will be readjusted to your normal entitlements on Week 1 basis, after the Department of Social Protection reports to revenue that they are no longer making PUP payments to you. It is important that you inform the DSP immediately once you return to employment. Information on how to close your pandemic unemployment payment application can be found here. 

Get In Touch 

If you require further assistance in relation to your taxes, please feel free to get in touch.