Do I have to pay tax on my COVID-19 payment?
If you get the COVID-19 Pandemic Unemployment Payment, you may owe tax to Revenue at the end of the year
Many people have lost their jobs or had their hours reduced as a result of the COVID-19 pandemic. Most people who have found themselves out of work have applied for the COVID-19 Pandemic Unemployment Payment, a €350 flat-rate payment to support those who are unemployed as a result of COVID-19.
What many people don’t realise is that this payment is taxable, which means you may have to pay tax on this income later on. Whether or not you have to pay tax on it will depend on your overall income during the year.
How is the tax on the COVID-19 payment paid?
If you are working for an employer, your tax is usually deducted every time you get paid, which means you are paying your tax as you go throughout the year. However, tax is not deducted from your COVID-19 Pandemic Unemployment Payment before it goes into your bank account, which means you may owe that tax at the end of the year.
To collect the tax you owe on the COVID-19 Pandemic Unemployment Payment, Revenue may reduce the amount of tax credits you have. Tax credits are used to reduce the amount of tax you pay. The more tax credits you have, the less tax you will have to pay.
This means that to pay the tax back, the amount of tax deducted each time you get paid from work will be slightly higher than normal. Instead of paying all the tax you owe at once, you will pay it over time, usually over a 2 year period.
However, we are still waiting for Revenue to confirm how this tax will be collected and what the period of time for paying it will be.
How much tax do I have to pay on my COVID-19 payment?
There is no need to worry about receiving a big tax bill at the end of the year. The amount of tax you have to pay is not likely to be a high amount, and it will be deducted from your income gradually over time, instead of all at once.
Which COVID-19 related payments are subject to tax?
The following payments are subject to tax, which means you may owe tax to Revenue later this year if you are getting any of these payments:
- The COVID-19 Pandemic Unemployment Payment
- Illness Benefit
Similarly, if your employer is paying you using the COVID-19 Temporary Wage Subsidy Scheme, whether or not you will owe tax will depend on your personal circumstances and your overall income for 2020. This is something that will be assessed at the end of the year.
The Supplementary Welfare Allowance is not subject to tax.
Need more information?
Would you like more information? Maybe you would like to talk through your own situation? Get in touch through our online chat system for 16 to 25 year olds - Monday to Friday 4pm to 8pm.
Feeling stressed or overwhelmed?
Dealing with tax can be stressful, but there is no need to panic. If you are feeling overwhelmed by this situation and you want to talk:
- Get anonymous support 24/7 with our text message support service
- Connect with a trained volunteer who will listen to you, and help you to move forward feeling better
- Text SPUNOUT to 50808 to begin
- Find out more about our text message support service