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Taxation of DSP payments

  1. Overview
  2. Taxable DSP payments you need to declare
  3. How DSP payments are taxed
  4. Taxation of illness, occupational injury and partial capacity benefits
  5. Taxation of maternity, adoptive, and health and safety benefits
  6. Taxation of Pandemic Unemployment Payment (PUP)
  7. Taxable payments you do not need to declare
  8. Tax-exempt DSP benefits

How DSP payments are taxed

Taxable Department of Social Protection (DSP) payments are liable to Income Tax, but not Universal Social Charge (USC) or Pay Related Social Insurance (PRSI). How the tax on DSP payments is collected depends on whether you are either a PAYE taxpayer or self-employed.

If a taxable DSP payment is your only source of income, you may not have to pay tax. This is because your tax liability does not exceed your tax credits. If you have a DSP payment and another source of income, you may have to pay tax.

Note

If you are getting a DSP payment, you might get an Employee Tax Credit in addition to your normal tax credits.

PAYE taxpayer

Revenue reduces your annual tax credits and rate band on your Tax Credit Certificate (TCC) to take account of any taxable DSP payments. You can view, print or download your TCC in My Documents in myAccount.

Revenue will make an amended Revenue Payroll Notification (RPN) available to your employer or pension provider so they can collect any tax due.

  • Example

    Martin has the following tax credits and rate bands for 2024:

    Annual and weekly credits and rate bands from 1 January
    DescriptionAnnualWeekly
    Tax credits

    €3,750

    €72.12
    Rate band

    €42,000 taxed at 20%

    Balance taxed at 40%

    €807.70 taxed at 20%

    Balance taxed at 40%
    Martin's pay from his employer, is €650 per week. His weekly Income Tax is calculated as follows:
    Calculation of Martin’s weekly Income Tax
    DescriptionIncomeTax

    Taxed at 20%

    €650

    €130

    Taxed at 40%

    €0

    €0

    Gross tax

    		  

    €130

    Deduct tax credits

    		  

    €72.12

    Tax payable

    		  

    €57.88

    The DSP report to Revenue that Martin is now getting a taxable payment of €208 each week. We reduce his annual tax credits and rate band on his Tax Credit Certificate (TCC) to take account of the taxable DSP payment.

    Adjustment of Martin’s annual tax credits and rate band
    DescriptionCalculationValue

    Weekly DSP payment

    		  

    €208

    Annualised DSP payment

    €208 x 52 (weeks)

    €10,816

    Rate band adjustment

    		    

    Current annual rate band

    		  

    €42,000

    Deduct notional annualised payment

    		  

    €10,816

    Revised rate band

    		  

    €31,184

    Tax credit adjustment

    		    

    Current tax credits

    		  

    €3,750

    Deduct 20% of notional annualised payment

    €10,816 x 0.20

    €2,163

    Revised tax credits

    		  

    €1,587

    Martin can see the new amounts in his TCC. We send a revised RPN to Martin’s employer.

    Adjusted rate band
    DescriptionAnnuallyWeekly 
    Tax credits

    €1,587

    €30.52

    		  
    Rate band

    €31,184 taxed at 20%

    Balance taxed at 40%

    €599.70 taxed at 20%

    Balance taxed at 40%

    		  

    Martin’s pay from his employer of €650 per week is now calculated for Income Tax purposes as follows:

    Calculation of Martin’s weekly Income Tax after adjustment
    DescriptionIncomeTax

    Taxed at 20%

    €599.70

    €119.94

    Taxed at 40%

    €50.30

    €20.12

    Gross tax

    		  

    €140.06

    Deduct tax credits

    		  

    €30.52

    Tax payable

    		  

    €109.54

    Martin’s Income Tax payable has increased to take into account his taxable DSP payment. There will be no change to Martin’s USC and PRSI payments on his pay of €650.

Self-employed

You must include details of any taxable DSP payments on your Form 11 and pay the tax due when making your annual income tax payment. Please use the Revenue Online Services (ROS) to submit your tax return.

Next: Taxation of illness, occupational injury and partial capacity benefits

Published: 12 February 2024 Print this page

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