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Tax after maternity benefit

  • 26-08-2015 03:48PM
    #1
    Lillrad
    Registered Users, Registered Users 2 Posts: 2 ✭


    Hi All. I had a baby in January of this year. My maternity leave started 4th January to the 3rd July. My employer did not pay me while I was on ML so I just received the maternity benefit. I have now returned to work and I am paying my usual amount of tax. Surely I would have worked up some tax credits when I was not earning anything for the 6 months. I know maternity benefit is taxable, but surely it wouldnt be liable to the same amount of tax as a full wage? Thanks in advance


Comments

  • #2
    gerrybbadd
    Registered Users, Registered Users 2 Posts: 10,301 ✭✭✭✭gerrybbadd


    Lillrad wrote: »
    Hi All. I had a baby in January of this year. My maternity leave started 4th January to the 3rd July. My employer did not pay me while I was on ML so I just received the maternity benefit. I have now returned to work and I am paying my usual amount of tax. Surely I would have worked up some tax credits when I was not earning anything for the 6 months. I know maternity benefit is taxable, but surely it wouldnt be liable to the same amount of tax as a full wage? Thanks in advance

    While it's not liable to the same amount of tax, it is liable. So what has likely happened is, your cert could have issued with reduced tax credits (as this is how maternity benefit is treated), or with full tax credits, on a week 1 basis


  • #3
    Lillrad
    Registered Users, Registered Users 2 Posts: 2 ✭Lillrad


    I actually got my cert this morning coincidentally and yes it has reduced tax credits but I don't understand what this week 1 is about. Also if my tax credits are based over 12 months surely if I'm only working for 6 of those months I should pay less tax? Sorry for the questions i just find tax so complicated


  • #4
    gerrybbadd
    Registered Users, Registered Users 2 Posts: 10,301 ✭✭✭✭gerrybbadd


    Lillrad wrote: »
    I actually got my cert this morning coincidentally and yes it has reduced tax credits but I don't understand what this week 1 is about. Also if my tax credits are based over 12 months surely if I'm only working for 6 of those months I should pay less tax? Sorry for the questions i just find tax so complicated

    The maternity benefit is a funny one.

    Firstly, week 1 basis is a protective measure, but will stay in place up to the end of the year. http://www.revenue.ie/en/tax/it/week-1-basis.html

    Now, the way maternity benefit works is, say for example, you get €230 per week from Social Welfare (DSP). DSP then interface this over to Revenue, because they can't tax it directly. Revenue have to input €230 X 52 weeks, on a week 1 basis, to ensure that, if you are getting paid through your job, that the correct amount of tax will be deducted, maternity benefit included ( your tax credits are reduced, so you pay more tax).

    Then, when the maternity benefit ceases, DSP again interface with Revenue. The maternity benefit is then brought to ZERO in your credits, and a new cert issued to the job, still on a week 1 basis. So, your wages return to normal then.
    http://www.revenue.ie/en/personal/faqs/taxation-welfare-benefits.html#section4


  • #5
    allthedoyles
    Registered Users, Registered Users 2 Posts: 6,892 ✭✭✭allthedoyles


    If the system was working properly , it would be very straight-forward .

    DSP would know how much you received from Jan-Jun and the info would be automatically updated to Revenue .
    Then your tax credits would be adjusted , and you could be left on a cumulative method until year end .


    Anyways ensure you apply for P21 in Jan 2016 and inform revenue of your change in circumstances ( if this is No. 1 kid )


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