Taxation of DEASP payments

Detailed examples of taxation of payments

In the rest of this section, references to Maternity Benefit include Adoptive and Health and Safety Benefit, as the tax treatment is similar.

If you receive full wages while on maternity leave and pay over the Maternity Benefit to your employer

To collect the Income Tax on your Maternity Benefit, we reduce your tax credits and rate band. Only the difference between the wages you receive and the Maternity Benefit you pay over to your employer is subject to:

If you receive full or 'top-up' wages while on maternity leave and keep the Maternity Benefit

To collect the IT on your Maternity Benefit, we reduce your tax credits and rate band. Only the wages actually paid by your employer are subject to IT, USC and PRSI.

If you do not receive wages while on maternity leave but keep the Maternity Benefit

We reduce your tax credits and rate band by taking account of the Maternity Benefit and make a revised RPN available to your employer on a Week 1 basis. A tax refund may be due to you. As the RPN is on a Week 1 basis, your employer cannot make this refund. You should contact your Revenue office to see if see we can remove the Week 1 basis.

If not, and if you are still on the Week 1 basis at the end of the tax year, you should submit an online Form 12. This is available on PAYE services in myAccount and we will review your tax position.

Detailed examples of how Maternity Benefit is taxed

We adjust your annual tax credits and rate band to collect the full amount of tax due on a weekly basis. First, we ‘annualise’ the weekly amount of Maternity Benefit payable, and then we divide this by 52 to give the weekly figure.

We use a notional ‘annualised’ figure, but only the actual amount of weekly Maternity Benefit received is taxed this way.

The weekly adjusted tax credit and rate band apply for the duration of the Maternity Benefit payments only. They are readjusted after the last payment is received from DEASP. We can then remove the Maternity Benefit weekly element from the weekly tax credits and rate band.

You can see how this works in the following examples, where the employer:

  • pays wages while the employee is on maternity leave
  • does not pay wages while the employee is on maternity leave.

Couples taxed under joint assessment

Examples 3 and 4 use a single person's basic tax credits and rate band. You may not have enough tax credits and rate band to allow collection of the full amount of tax due. We will collect the balance by reducing your spouse’s or civil partner's tax credits and rate band.