The Universal Social Charge (USC) is a tax on income that came into effect on 1 January 2011 to replace both the income levy and the health levy. It is payable on an employee’s gross income, less certain exclusions.
Detailed information on the operation and calculation of USC can be found here.
Calculating USC
USC is calculated according to an employee’s tax basis using the prescribed rates and cut-off points. An employee’s basis for USC will generally correspond to the basis used to calculate PAYE. As with PAYE, the employee’s standard rate cut-off points determine what rates are applicable.
Employees whose annual gross income does not exceed the prescribed threshold are exempt from paying USC.
Employees on the cumulative and period 1 bases will have their cut-off points and USC determined by Revenue based on their P2C or P45 respectively. These are determined by the employee’s personal circumstances. Employees on the emergency basis have no cut-off points so their USC is calculated at the highest applicable rate.
SimplePay calculates employees’ USC on the applicable basis depending on the tax information captured on the system. It is, therefore, important to ensure that your employees are correctly set up with all of the relevant information (PPSN, tax information and take-on balances) entered as soon as possible. More information on doing so can be found in the following section:
Reporting USC
Employers must report and pay over their total monthly (or quarterly) USC liability to Revenue based on the P30. At the end of each tax year, a summary of the entire year’s liability is reported in the P35. SimplePay automatically generates both of these returns, as well as P60s and P45s, where applicable.