Taxation of the Jobseeker Benefit

[CatalinaB]

Hi. I'm looking for some clarification regarding the taxation of the Jobseeker Benefit:
- Is it taxed if it is your only source of income?
- If yes, at what rate (20%)?
- Does it come off directly from your weekly JSB pay?
All I could find on the revenue/citizens information sites is that it is collected on your JSB by reducing your annual tax credits and rate band (which I don't understand).
Sorry if this is already discussed in other threads, I couldn't find it. Thanks.

 

[Itchy]

Hi. I'm looking for some clarification regarding the taxation of the Job Seeker Benefit:
- Is it taxed if it is your only source of income?
- If yes, at what rate (20%)?
- Does it come off directly from your weekly JSB pay?
All I could find on the revenue/citizens information sites is that it is collected on your JSB by reducing your annual tax credits and rate band (which I don't understand).
Sorry if this is already discussed in other threads, I couldn't find it. Thanks.

Yes it is taxed but you receive the full payment €208. It'll be taxed at your marginal rate (as your tax credits will be reduced - so basically all your income for the year will be summed inc. JSB, and taxed. Example). If you receive a social welfare payment during the year, you will be taxed on a Week 1 basis rather than on a cumulative basis, which could affect how the rest of your income is taxed when you resume employment. So may need to request a balancing statement at the end of the year or you can get a refund of taxation paid if you go on JSB say in the middle of the year.

 

[CatalinaB]

Thanks for replying, Itchy. From what I'm reading it seems to say that the income tax due on the JSB will be charged when/if you resume employment. Would my understanding be correct?

 

[Salvadore]

Income from welfare payments is liable for tax in the same way as any other income but if the cumulative income in any given tax year doesn’t exceed your tax free allowance then there’s no tax liability.

I don’t think there’s any retrospective liability when you re-enter employment but I’m open to correction.

 

[Protocol]

In Ireland, tax is not deducted at source from welfare payments.

So if tax is due, it must be deducted from some other income.

So your wages, or some other income, will be charged the tax due on the JSB.


Obviously, if your income is so low that you don't owe any tax, then you should not pay any tax.

 

[T McGibney]

Income from welfare payments is liable for tax in the same way as any other income

Partly true.

Income from welfare benefits are normally taxable.

Income from welfare allowances are normally tax-exempt.

 

[Salvadore]

Partly true.

Income from welfare benefits are normally taxable.

Income from welfare allowances are normally tax-exempt.

Is this because allowances (as distinct from benefits) are means-tested?

If means are so low as to qualify for an allowance, there generally wouldn’t be any other income anyway. So whether allowances should be treated separately from benefits for tax purposes would be a moot point?

 

[jpd]

It's just complicated - there are taxable benefits you have to declare, taxable benefits you do not have to declare and tax-exempt benefits

see here https://www.revenue.ie/en/jobs-and-pensions/taxation-of-social-welfare-payments/index.aspx

 

[CatalinaB]

Income from welfare payments is liable for tax in the same way as any other income but if the cumulative income in any given tax year doesn’t exceed your tax free allowance then there’s no tax liability.

I don’t think there’s any retrospective liability when you re-enter employment but I’m open to correction.

Thanks Salvadore. I wonder though, would a redundancy payment also be included in the cumulative income for the respective tax year or just the wages? If yes, then it's likely that the cumulative income will exceed the tax free allowance. In which case, will the JSB pay have the marginal rate tax deducted from the weekly amount of €208?

 

[S class]

Jobseekers benefit maximum level is 220 euro.
First 13 euro is tax free.

 

[T McGibney]

Is this because allowances (as distinct from benefits) are means-tested?

If means are so low as to qualify for an allowance, there generally wouldn’t be any other income anyway. So whether allowances should be treated separately from benefits for tax purposes would be a moot point?

Generally but most definitely not always.

 

[Salvadore]

Thanks Salvadore. I wonder though, would a redundancy payment also be included in the cumulative income for the respective tax year or just the wages? If yes, then it's likely that the cumulative income will exceed the tax free allowance. In which case, will the JSB pay have the marginal rate tax deducted from the weekly amount of €208?

I can’t say for certain.

Redundancy payments at the statutory rate are tax exempt. Additional redundancy payments are subject to a particular lump sum tax treatment address the time the payment, as outlined here.

Taxation of lump sum payments

Lump sum payments in compensation for loss of employment are subject to tax. How is tax calculated and what are your entitlements?

www.citizensinformation.ie

Assuming any tax on redundancy payments has been properly paid, the net amount you receive would not be income as such so it should not be added to your benefits for the purposes of calculating income tax.