Universal Social Charge explained

The Universal Social Charge (USC), which came into effect on 01 January 2011, is a tax payable on gross income, including notional pay, after any relief for certain capital allowances, but before pension contributions.

All individuals who earn in excess of €10,036 (€4,004 in 2011) per annum are liable to this charge.

From 01 January 2012 the USC will be applied on a cumulative basis rather that the Week 1 / Month 1 basis applied in 2011.

Exemptions

The following is exempt from the USC;

• Where an individual’s total income for a year does not exceed €10,036 (€4,004 in 2011).

• All Dept. of Social Protection payments.

• Income already subject to DIRT.

• Certain other income sources

Rates & Thresholds

The following rates apply to persons under 70 years;

The following rates apply to persons over 70 years;

Medical Card

Persons entitled to a full Medical Card are not excluded from the USC. The exemption that existed for people who hold a full Medical Card in relation to the Income Levy is not a feature of the USC.

Self employed

Capital allowances

Capital allowances claimed as normal trading expenses in respect of items of plant & machinery and certain buildings are allowed as a deduction before the USC is calculated. There is no deduction allowed for capital allowances claimed by passive investors or lessor.

Tax exempt income sources

An individual whose income consists of exempt source income from occupation of certain woodlands, profits from stallion fees, stud greyhound services fees and farmland leasing, along with the artists exemption, will be subject to the USC subject to the relevant thresholds.

Preliminary tax for 2011

An individual can calculate their preliminary tax for 2011 on the basis of 90% of the current year liability, and incorporate the USC using the rates of 2%, 4% and 7%.

However where the individual wishes to pay preliminary tax on the basis of the 100% of the previous year liability then their payment should be on the basis of the final liability for the year 2010 as if USC at the appropriate rates had been paid for that year.

Please note that the deadline for paying the preliminary tax for 2011 will be 31 October 2011. The preliminary tax deadline just passed was for 2010.

PRSI

The PRSI net has been broadened and from 2012 will be charged on rental, investment and other income.

• The employee PRSI ceiling of €75,036 is abolished
• Class S PRSI is increased from 3% to 4%
• The modified PRSI rate for civil servants increases to 4% on incomes in excess of €75,036