Universal Social Charge (USC) - General Information
USC operates in the same manner as PAYE, varying by employee:
- USC rates and cut off points (COPs) are issued per employee
- Employers are advised of these rates and COPs along with the calculation basis on the Revenue Payroll Notification (RPN)
- Employers should not alter treatment from the RPN instruction
- Employers should check for RPNs before processing each pay period
- Employers should not change how an employee is treated for USC based on personal circumstances (medical card/over70)
EMPLOYERS ARE TO OPERATE USC STRICTLY ON THE EMPLOYEE ASSIGNED USC RATES AND CUT-OFF POINTS AS ADVISED BY REVENUE IN THE RPN FILE, WITHOUT EXCEPTION.
Revenue Payroll Notification (RPN)
The Revenue Payroll Notification (RPN) is used to retrieve tax credits and cut off points and also USC rates and cut off points for new and existing employees.
Individuals aged 70 and over whose aggregate income is less than €60,000 and Individuals who hold full medical cards whose aggregate income is less than €60,000
It is NOT the responsibility of the employer to determine amendments to the operation of USC based on an employee’s personal circumstances.
Where lower rates of USC apply in certain circumstances, for example, in the case of employees aged 70 and over whose aggregate income is less than €60,000, or where employees hold full medical cards whose aggregate income is less that €60,000, these lower rates will be stated on the RPN issued by Revenue.
Where lower rates are not stated on the RPN file currently held, the employee should be advised to contact their local Revenue office in order to update their USC status with Revenue.
The 2021 USC exemption income threshold is €13,000.
Where Revenue determines that USC exemption applies, it will be advised to the employer on the RPN file. The employer does not make any adjustment unless advised to do so via the RPN issued to them for an employee.
USC Emergency Basis
No cut off points are allowed. The emergency rate of USC is the highest rate applicable to a PAYE employee, currently 8% for 2021. While the rules applicable to emergency tax operable in PAYE include a standard rate cut off point for the first four weeks (provided the employer has the PPS Number for the employee), for USC there is just a flat % rate (with no cut off point) applied to all payments.
Please note: all employees will be on the emergency basis until an RPN Is received for them.
Employees Commencing Employment
RPNs will be available in real time for new employees, this removes the need for the emergency basis in most cases.
USC Exemption Marker
The annual income exemption threshold of €13,000 applies for 2021 - the process of employee self election to Revenue still applies.
Where Revenue determine that the employee/pensioner’s total annual earnings (from all USC-able sources) will not exceed the USC exemption threshold of €13,000, the USC exemption will be stated on the RPN issued by Revenue. This USC exemption marker is an instruction to the employer/pension provider not to deduct USC from payments being made.
Where the employer holds an RPN which does not show exemption and the employee/pensioner advises them that USC exemption applies to them, the employee/pensioner must contact Revenue themselves to inform Revenue that their earnings will not exceed €13,000 in the tax year. Revenue will then issue a revised RPN to the employer with an updated USC instruction.
Once a new RPN is used to the employer which indicates that USC exemption is to be operated then any previous USC deducted will be refunded to the employee on the next payslip.
Calculating USC on Week 53
Where a week 53 occurs, an additional period of USC threshold is allocated to the employee on a week 1 basis.
Please note: if an employee's normal pay day has changed during this tax year or the preceding tax year, the additional USC cut off points do not apply.
You will therefore need to instruct the software if the additional USC cut off points are not applicable to an employee.
To prevent the additional USC cut off points being allocated go to:
Employees > Add/Amend Employees > Select the employee > Click the Revenue Details tab > Tick to indicate exemptions/exclusions apply > tick to exclude the employee from the week 53 USC concession > update to save the change.