Taxation of social welfare payments - Illness Benefit (IB)

Overview

The three main types of social welfare payment made by the Department of Employment Affairs and Social Protection (DEASP) are:

  • contributory payments, for example, IB, which is based on your Pay Related Social Insurance (PRSI) contributions
  • non contributory payments, for example, Jobseeker's Allowance, which is based on a means test
  • universal payments, for example, Child Benefit, which is not based on PRSI contributions, and is not means tested.

For the years up to 31 December 2017, this section will explain how IB and Occupational Injury Benefit, both contributory payments, are taxed. It will also explain how you include these benefits in your payroll.

Note

From 1 January 2018, employers are no longer to include IB and Occupational Injury Benefit payments in employees’ pay. From that date Revenue will collect the tax due on IB and Occupational Injury Benefit by reducing the employee’s tax credits and rate bands. Employees’ USC rate bands will not be affected.

Next: Taxing IB and Occupational Injury Benefit