Taxation of DSP payments

Anne earns €700 per week. The RPN sent to the employer shows the following tax credits and rate band. These will apply from 1 January 2024.

Anne is on maternity leave from 1 February 2024. She qualifies for Maternity Benefit and receives €250 per week, which she has mandated directly to her employer. Anne’s employer continues to pay her normal gross wage of €700 per week while she is on maternity leave. This consists of the Maternity Benefit plus a ‘top-up’ wage.

We receive Anne’s Maternity Benefit details from the DSP. Then we reduce her annual tax credits and rate band to take account of the Maternity Benefit as follows:

A revised RPN, on a Week 1 basis, will be made available, on request, by Anne’s employer. It shows the following tax credits and rate band from 1 February 2024:

Anne’s first pay day in February 2024 is 4 February. She receives her ‘normal’ gross pay of €700 from her employer, the Maternity Benefit having been mandated by Anne to go directly to her employer.

This €700 is made up of:

The difference between the €700 wage and the €250 Maternity Benefit paid to Anne is €450. This €450 is subject to Income Tax, USC and PRSI in the usual way.

The Maternity Benefit is subject to Income Tax, but not to USC or PRSI. Revenue will collect the Income Tax by reducing the tax credits and rate band.

Anne’s employer applies the revised RPN and calculates her weekly Income Tax as follows:

After maternity leave

In August 2024, the DSP informs Revenue that Anne’s Maternity Benefit payments have stopped. We adjust Anne’s tax credits and rate band by removing the Maternity Benefit.

We send a revised RPN (on a Week 1 basis) to Anne’s employer. It shows the following tax credits and rate band from 1 August 2024:

A Week 1 basis means that Anne’s employer is to apply the tax credits and rate band on a week-by-week basis. This is not backdated to 1 January 2024.

Anne returns from maternity leave on 1 August 2024. Her first pay day is 4 August. Her gross pay is €700, and her employer calculates her weekly Income Tax as follows:

As Anne’s income is covered by her standard rate band, she does not pay tax at the higher rate of 40%.

Anne’s gross pay of €700 is also subject to USC and PRSI as normal.

Sarah earns €700 per week. The RPN sent to her employer shows the following tax credits and rate band which will apply from 1 January 2024:

Sarah is on maternity leave from 1 March 2024. She qualifies for Maternity Benefit and receives €250 per week, which she keeps. Sarah's employer does not pay her wages while she is on maternity leave.

We receive Sarah’s Maternity Benefit details from the DSP. Then we reduce her annual tax credits and rate band to take account of the Maternity Benefit as follows:

We make a revised RPN (on a Week 1 basis) available to Sarah's employer. It shows the following tax credits and rate band from 1 May 2024:

Sarah’s employer transfers these new figures to the payroll record.

Her Maternity Benefit is not subject to USC or PRSI.

After maternity leave

In September 2024, the DSP tells us that Sarah's Maternity Benefit payments have stopped. Revenue adjusts Sarah's tax credits and rate band by removing the Maternity Benefit.

We make a revised RPN (on a Week 1 basis) available to Sarah's employer. It shows the following tax credits and rate band from 1 September 2024:

A Week 1 basis means that Sarah's employer is to apply the tax credits and rate band on a week-by-week basis. This is not backdated to 1 January 2024.

Sarah returns from maternity leave on 1 September 2024. Her first pay day is 4 September 2024. Her gross pay is €700 and her employer calculates her weekly Income Tax as follows:

Sarah’s gross pay of €700 is also subject to USC and PRSI as normal. Sarah was not paid by her employer during her maternity leave and her tax credits exceed the tax due on her Maternity Benefit.

A tax refund may be due to Sarah. If Sarah did not receive one from her employer before the end of the year, she should submit an online Income Tax return throughmyAccount.