Illness benefit taxation

Kash

Hello,

I'm hoping some kind soul can explain how illness benefit is taxed.

I had complications during pregnancy that resulted in me going on illness benefit in September of last year. Once on benefit, I was not receiving any wages from my place of employment.

I recently submitted my P21, and have been advise that I have underpaid tax to the tune of 900 euro. I am very curious as to:

a. how I was to know that tax was due (should I have received a letter? Should my employer?)
b. how I was to pay the tax? (normally I pay all tax through my wages, but as I wasn't getting any, should I have been sending a cheque somewhere?
c. how the tax can be paid back, will I have to send a lump sum?
d. why the illness benefit isn't taxed at source?

Lastly, I am now in receipt of maternity benefit since February (and will be on it for 6 months) which is also taxable - should I be expecting another hefty underpayment for my P21 related to 2015? Is there anything I can do to avoid having to payback a lump sum?

Help!

mp22

Moved from state benefits

chickenlicken2

A. Your employer should have received an updated tax credit cert for you which incorporated a reduction in tax bands and credits re the illness benefit. They may not have received this or alternatively they might not have applied it correctly.
B. If you went back to work you'd have been paying slightly more tax on your pay.
C. Either a lump sum or they can do a repayment plan by reducing your tax credits so you are repaying it over the year.
D. It would involve too much of a workload for the revenue to administer.
E. Maternity benefit is taxed differently there is a lot of detail on revenue website about this. If you are working for the same employer and it was a case that they didn't apply your tax credits cert correctly just keep an eye on this one.

Finally just for your own sake might be no harm to have an accountant look at this.
Re the illness benefit; 188 per week for 12 weeks taxed at 41% is 925 euro.
However if you didn't get paid October to December you have 3 months of unused tax credits and unused standard rate cut off point that should shelter this. However if you did go back to work or perhaps received a bonus through payroll in December then it rolls back to point A above that either the cert wasn't sent out or your employer might not have applied it correctly and you probably got some tax back late last year.

CIARAN_BOYLE

Kash wrote: »

Hello,

I'm hoping some kind soul can explain how illness benefit is taxed.

I had complications during pregnancy that resulted in me going on illness benefit in September of last year. Once on benefit, I was not receiving any wages from my place of employment.

I recently submitted my P21, and have been advise that I have underpaid tax to the tune of 900 euro. I am very curious as to:

a. how I was to know that tax was due (should I have received a letter? Should my employer?)
b. how I was to pay the tax? (normally I pay all tax through my wages, but as I wasn't getting any, should I have been sending a cheque somewhere?
c. how the tax can be paid back, will I have to send a lump sum?
d. why the illness benefit isn't taxed at source?

Lastly, I am now in receipt of maternity benefit since February (and will be on it for 6 months) which is also taxable - should I be expecting another hefty underpayment for my P21 related to 2015? Is there anything I can do to avoid having to payback a lump sum?

Help!

Did you return to employment in 2014. If so your employer should have received a letter stating illness benefit received but since he didn't (or since he ignored it if received) he may have given you a tax refund after returning to work wrongly.

Illness benefit cannot be taxed at source without you having to register with Revenue to have your tax credits transferred from your employer to the department of social protection

I would need more details to give you a more detailed answer especially regarding your last point.

Kash

chickenlicken2 wrote: »

A. Your employer should have received an updated tax credit cert for you which incorporated a reduction in tax bands and credits re the illness benefit. They may not have received this or alternatively they might not have applied it correctly.
B. If you went back to work you'd have been paying slightly more tax on your pay.
C. Either a lump sum or they can do a repayment plan by reducing your tax credits so you are repaying it over the year.
D. It would involve too much of a workload for the revenue to administer.
E. Maternity benefit is taxed differently there is a lot of detail on revenue website about this. If you are working for the same employer and it was a case that they didn't apply your tax credits cert correctly just keep an eye on this one.

Finally just for your own sake might be no harm to have an accountant look at this.
Re the illness benefit; 188 per week for 12 weeks taxed at 41% is 925 euro.
However if you didn't get paid October to December you have 3 months of unused tax credits and unused standard rate cut off point that should shelter this. However if you did go back to work or perhaps received a bonus through payroll in December then it rolls back to point A above that either the cert wasn't sent out or your employer might not have applied it correctly and you probably got some tax back late last year.

Thank you for taking the time to respond, you've managed to clear a few things up for me, which I sincerely appreciate!bim also very relieved that I will not be forced to find a lump sum to pay it back while on maternity leave.

Once I receive a copy of the P21, I'll speak to an accountant, it seems like a good idea. I've never used one before, but since getting married, it seems our tax is much harder to understand and I'm probably using our credits all wrong.

Thanks again!