Over one million people received some form of income support from the State in recent months, whether it was the Covid-19 Pandemic Unemployment Payment, or payments through the Temporary Wage Subsidy Scheme.

The financial support has been welcome during this time of crisis, but many recipients may not be aware that a tax liability comes with it.

"It's always a nasty surprise when you discover you have to pay tax," said Brian Keegan, Director of Public Policy at Chartered Accountants Ireland.

"I think in the rush to get money into people's pockets when the economy was shutdown, through the Pandemic Unemployment Payment and the Temporary Wage Subsidy Scheme, the tax consequences might not have been immediately apparent to recipients."

This income is not taxed at source, Mr Keegan said, so at the end of the year, Revenue will be looking at what individuals have tax liabilities as a consequence of getting those payments, and will be looking for them to account for that tax in future years.

When a tax liability happens on a social welfare payment, people's tax credits are reduced in future years so effectively any tax that is due is collected over time.

"I don't think anybody should be overly concerned about being hit for a very large tax bill at the end of the year," he said.

"Nevertheless, it is there, and certainly for people receiving the Pandemic Unemployment Payment, particularly perhaps the self-employed, it might be worth setting aside €10/€15 a week towards a tax bill that will arise inevitably and that Revenue will collect."

The Department of Employment Affairs and Social Protection shares information with Revenue and Revenue will know how much PUP, and what payment was made through TWSS to every taxpayer.
According to Revenue, when an end of the year review takes place for a PAYE taxpayer, it may be the case that they have unused tax credits that will cover any tax owing that may arise. 

Where a PAYE taxpayer owes tax, "it is normal Revenue practice to collect any tax owing in manageable amounts by reducing tax credits for a future year or years in order to minimise any hardship".

Additionally, if an individual has any additional tax credits to claim, for example health expenses, this will also reduce any tax that may be owing.