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 in Revenue’s FAQ document.
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. The latest applicable thresholds, standard rates and cut-off points are available on Revenue’s website.
Employees on the cumulative and period 1 bases will have their cut-off points and USC determined by Revenue and provided in the RPN. 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 sections:
You can view the calculation of USC for a particular payslip for an employee by viewing the USC trace. To open the USC trace:
- Go to Employees and select the relevant employee
- Use the date dropdown menu next to Payslip to select the relevant period’s payslip
- Under Deduction in the Payslip section of the screen, you will see the deduction for USC, with USC shown in blue to indicate that it has a hyperlink. Click on this hyperlink to open the USC trace.
Employers must report and pay over their PAYE liability each pay period as part of their electronic submissions to Revenue. These submissions must be done for each pay period on or before the date on which employees receive payment. More information on the submission process can be found in this article:
Where the employer holds a RPN which does not show exemption and the employee believes that USC exemption applies to them, the employee 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 with an updated USC instruction which the employer will action.
If the newly issued and retrieved RPN indicates that USC exemption is to be used, any previous USC that was deducted will be refunded to the employee on the subsequent payslip.