Universal Social Charge (USC) in Ireland
Many tax rebates processed here at Irish Tax Rebates often include a refund for at least one of the past four years for an overpaid universal social charge payment.
Since its introduction, many people have been subject to overpayment of USC due to clerical errors, miscommunication and/or misunderstandings. We have found three key reasons for several people receiving tax refunds from overpaid USC. And in this article, we explain how you could be eligible to claim back USC. But first, let’s explain what USC is, who pays it, how it is calculated, the USC rates, thresholds, and more.
What is USC?
USC stands for Universal Social Charge and is a tax individuals pay on their total income, including employment income and taxable employer benefits, in Ireland. Introduced in 2010 during the financial crisis, USC replaced both the income and health levies. It is a tax payable at either the standard or reduced rates, depending on individual circumstances.
Who Pays USC?
Individuals begin to pay USC when their gross income is more than €13,000 annually. Once your income is above this €13,000 limit, you will start to pay the relevant USC rate on all of your taxable income, which is calculated weekly or monthly.
How USC is Calculated
As mentioned, USC is calculated based on an individual’s total income, which involves applying the correct USC rate bands to the income. The USC is applied on a weekly or monthly basis and does not include social welfare or similar payments. USC has specific rates and cut-off points, and employees’ tax basis is used to determine their USC liability.
USC Rates and USC Thresholds
What is the current rate of USC in Ireland? And how much USC should I be paying? Updated in the recent Budget, as of 1st January 2024, the USC bands are as follows:
- Less than €12,012: 0.5% USC rate
- Income between €12,012 and €25,760: 2% USC rate
- Income between €25,760 and €70,044: 4% USC rate
- Balance of Income over €70,044: 8% USC rate
Can I Claim USC Back?
Yes, it’s possible to claim back Universal Social Charge! It’s common to have overpaid USC taxes in certain situations, and you may not know you are eligible for a tax refund. If you qualify for a rebate, we here at Irish Tax Rebates can help. Have a look below to see if you are eligible for a USC refund.
How You Could be Eligible for a USC Tax Refund:
Breaks in Employment/Working Reduced Hours
If your work hours have changed over the years, it is possible you paid the USC at the higher rate when, in fact, your income level had not actually exceeded the USC thresholds. This may be due to being out of work during the year or working reduced hours later in the year.
As a result, many people overpaid the Universal Social Charge.
Change of Income Bands
As salaries go up or down, the level of USC that we must pay can change. Not only this, but the government regularly changed the income bands to which the different universal social charge rates apply.
Where our level of income changes or the USC income band changes, mistakes with USC payments can and do often occur, in several cases, such instances can result in an overpayment of the USC.
Are You a Medical Card Holder?
If you hold a full medical card (not a GP visit card), you are entitled to pay a reduced rate of USC while in employment. If your employer or Revenue is unaware that you hold a full medical card, you may not be granted your USC reduced rate.
If you have ever been in employment while holding a full medical card over the last four years, it is worth checking out if you were charged the correct rate of USC and whether you are due a tax refund as a result.
USC Exemptions
There is no USC payable on payments received from the Department of Social Protection (DSP) as well as payments that are similar to DSP payments and schemes but paid by other bodies. Some common exempt payments are:
- Funds for Students with Disabilities
- Mobility Allowance
- Social welfare payments received from another country
- TaxSaver Commuter Ticket Scheme
- Cycle to Work scheme
- Statutory redundancy payments
- Foster care payments
- Child Benefit
- Rent a Room Relief
- Income on which you have already paid DIRT tax
Income Liable to USC But Not Income Tax:
It’s important to remember that some sources of income are exempt from income tax but are still liable to USC. Income exempt from income tax but not USC:
- The occupation of particular woodlands
- Profits from stallion fees
- Stud greyhound services fees and farmland leasing
- Patent royalty income
- Earnings of certain writers, artists and composers
If any of these sources of additional income apply to you, our sister website, Tax Returns Plus can help you with the tax returns required for these additional incomes.
Universal Social Charge FAQs
Why is My USC So High?
Factors influencing a higher USC amount include a higher gross salary, as USC is a percentage-based tax. Additionally, the USC rates vary based on income bands, with higher rates applied to higher income levels.
So, if your earnings fall into a higher USC rate band, it can contribute to a higher USC amount. Being aware of your gross income, eligible tax credits, and relevant USC rates is essential to understanding why a higher USC deduction may be applied to your income.
What is the Difference Between PRSI and USC?
The main difference between PRSI and USC lies in their purposes and the types of benefits they fund. PRSI is a social insurance contribution that employees, employers, and self-employed individuals make to support social insurance benefits such as state pensions, illness benefits, and jobseeker’s benefits. It is primarily focused on providing social insurance coverage.
On the other hand, USC is a tax on income, including notional pay and certain benefits, and contributes to the general funding of public services and social welfare programs. While PRSI is earmarked explicitly for social insurance benefits, USC is a broader taxation mechanism used for funding various government services beyond social welfare.
What is Universal Social Charge Used For?
The funds collected through USC contribute to financing various social welfare programs and services the government provides. These programs include health, social protection, and other public services. USC was introduced during the financial crisis in December 2010 to generate additional revenue for supporting public services and addressing economic challenges.
How Long Do USC Refunds Take?
With Irish Tax Rebates, if you are eligible, we can confirm your USC rebate within 12 working days. As soon as Revenue confirms that a rebate is due, we will notify you. Once all your documents are in order, if you are due a rebate, you will receive your rebate within a few days!
How Do I Claim My USC Back?
With Irish Tax Rebates!
Already know or want to find out if you are eligible for a USC refund? Claiming back Universal Social Charge has never been easier. Simply apply online today or get in touch directly with the Irish Tax Rebates team. Who knows? A sizeable tax refund could await you!
New Customers: Apply here.
Existing Customers: Apply For Additional Rebate
