PAYE customers – end of year process
What to do in an underpayment position
Your Preliminary End of Year Statement may indicate that you have an underpayment of Income Tax (IT) or Universal Social Charge (USC).
Reasons for an underpayment
There are a number of reasons why this can occur. These include:
- Your employer or pension provider may not have used the most up-to-date Revenue Payroll Notification (RPN). This may have resulted in incorrect tax credits or standard rate cut off point being applied to your income.
- Reduction or removal of a tax credit and the additional tax due was not fully collected during the tax year.
- A change in your pay frequency. For example, a change from being paid weekly to fortnightly.
- A change in your employment during the year which has resulted in you receiving more than 52 weeks tax credits or rate band against your income.
- The death of a spouse or partner, separation or divorce was not advised to Revenue. This would mean an adjustment to your tax credits or rate band was required.
- If you were in receipt of pandemic wage subsidy supports such as the Temporary Wage Subsidy Scheme (TWSS) or Pandemic Unemployment Payment (PUP) that were not fully taxed during the year in 2020.
- If your Illness Benefit payment(s) were not fully taxed during the tax year.
- Receiving pension or benefit payments from the Department of Social Protection (DSP):
- DSP income not accounted for during the tax year;
- Where there was an increase in payments from the DSP and these were not fully taxed during the tax year.
More information is available in the section on taxation of DSP payments.
What you need to do
If you are in an underpayment position, you may be entitled to additional tax credits and reliefs such as health expenses.
You will need to complete your 2021 Income Tax Return online through myAccount to:
- claim additional tax credits or reliefs
- declare additional income.
The additional information that you provide may impact your final income tax or USC position.
How to settle underpayments
From 1 January 2022, where you have an underpayment of IT or USC of less than €6,000, you will have the option to:
- pay your liability partially or in full through the ‘Payment/Repayments’ card in myAccount
- have the full or remaining liability collected, interest free, by reducing your future tax credits from 2022 over a maximum period of four years.
For underpayments in excess of €6,000, a notice will issue setting out the amount owed.
If you wish, you can pay the amount owing through the ‘Payments/Repayments’ card in myAccount. Should you wish to discuss repayment options that best suit your particular circumstances, you can contact us through MyEnquiries.
Information will also be included on your Statement of Liability explaining how the liability will be collected.
- Example 1
Maria completed her Income Tax Return for 2020 in October 2022. This has resulted in an underpayment of tax of €312. This will be collected by reducing Maria’s tax credits over four years as shown below:
Amount to be collected in each year
|Year||Amount to be collected|
The table below shows the reduction of Maria’s tax credits depending on how often she is paid:
Reductions of tax credits
|Pay Frequency||Amount to be collected|
- Example 2
Mark completed his Income Tax Return for 2021 in September 2022. This has resulted in an underpayment of tax of €200. This will be collected by reducing Mark’s tax credits over four years.
Mark would prefer to pay the €200 in full. He can make this payment using myAccount. This means that Mark will have the full credits he is entitled to at the beginning of 2023.