Social welfare: The tax changes you'll see when returning to work after the PUP

As restrictions continue to ease, many people have returned to work as the economy reopens, but how will the Pandemic Unemployment Payment affect how you are taxed?

Those working in retail and hospitality will now find themselves closing their PUP Claims and returning to everyday work life.

Taxation of the PUP changed between 2020 and 2021, and so your tax credits may have been altered.

Here is all you need to know about the changes to expect when returning to work after the PUP:

PUP tax in 2020

During 2020 the PUP was not taxable at the time of receipt from the Department of Social Protection.

This was done so that individuals could register and receive payments as soon as possible.

Last September, Revenue stated that PUP tax liabilities would be due at the end of 2020 and could be paid in the following ways:

· Collected interest free by reducing the employee's tax credits over four years from January 2022.

· Fully or partially pay any Income Tax and Universal Social Charge liability through the Payments/Repayments facility in myAccount.

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A Preliminary End of Year Statement is available on your myAccount and will detail any income received and reported by your employer.

It will also show the amount of PUP you received and a preliminary calculation of your Income Tax and Universal Social Charge for 2020.

PUP tax in 2021

Any PUP received in 2021 is taxable in real-time, meaning the PUP is treated like any other Department of Social Protection taxable payment.

The Department of Social Protection informs Revenue of the amount of taxable PUP paid to each person.

Any tax due is collected by reducing the person’s tax credits and rate band.

These adjusted tax credits and rate band will apply only for the duration of the PUP. They will be readjusted to your normal entitlements on a week one basis after the Department of Social Protection reports to Revenue that they are no longer making payments to you.

You must immediately inform the Department of Social Protection if you have returned to work as the information can then be passed onto Revenue for processing.