March 30, 2023
Is Maternity Benefit Taxable in Ireland? (Rates, Taxation Methods)
Maternity Benefit is subject to Income Tax in Ireland. Learn how Maternity Benefit is taxed, including the rate of taxation, and get answers to 4 FAQs.
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Ireland’s Maternity Benefit is a taxable payment made to women on maternity leave from work for pregnancy and infant care.
The standard Maternity Benefit rate is €262 per week — paid for 26 weeks.
Let’s explore how the payment is taxed and some related FAQs.
Much like other employee benefits in Ireland, Maternity Benefit is subject to Income Tax.
The Irish Revenue Department reduces the personal tax credits and rate band of an employee on maternity leave benefits to cover the taxation of Maternity Benefit.
What are personal tax credits and rate bands?
Tax credits are given to people who pay Income Tax and can be used to reduce the tax they have to pay.
The rate band refers to the tax charged on your income level. As of February 2023, rate bands stand at 20% and 40%.
The 20% tax rate applies to the first part of your income — up to a specific amount:
Single person - €40,000 annually.
One parent family - €44,000 annually.
Married couples/civil partners with one income - €49,000 annually.
Married couples/civil partners with two incomes - Up to €80,000 annually.
The rest of your income is taxed at a higher rate of 40%. The amounts mentioned above are 2023 figures.
You don’t have to pay Universal Social Charge (USC) and Pay Related Social Insurance (PRSI) on Maternity Benefit and other welfare payments.
Now let's discuss how Maternity Benefit is taxed.
The tax rate is 20% for the weekly Maternity Benefit payment.
In other words, if you receive the full Maternity Benefit payment, you will have a tax due of €52.40 (€262 x 20%) every week.
Revenue will take this amount, and they will deduct it from your tax credits and rate band.
The adjusted tax credit certificate and rate band apply for the duration of the Maternity Benefit only. When the employee returns to work, the tax credit certificate is readjusted.
Different taxation methods are applied based on the allowance type received by employees:
Full wage received while Maternity Benefit is paid to the employer: The difference between the full wage paid by employers and Maternity Benefit payment to the employer is considered for Income Tax, PRSI and USC.
'Top-up' weekly earnings received along with Maternity Benefit: Only the earnings received from the employer are subject to PRSI, USC, and Income Tax.
No wages paid, only Maternity Benefit received: You can request that your employer provide a revised Revenue Payroll Notification (RPN). You may also qualify for a tax refund, and you will have to contact your Revenue office for more information.
Feeling confused with all that information?
Here's a practical example illustrating how Maternity Benefit is taxed:
Beth earns a wage of €700 per week.
Her annual tax credits stand at €3550 annually or €68.27 weekly.
Her annual rate band is €40,000 taxed at 20% or €769.23 taxed at 20% weekly.
The balance is taxed at 40%.
Beth starts her maternity leave on 1 February 2023 and qualifies for a Maternity Benefit payment of €250 per week, which is paid to her employer.
Beth’s employer continues to pay her standard weekly wage of €700 while she is on maternity leave. This is an example of a “top-up” wage payment.
For tax calculation reasons, Beth's annualised Maternity Benefit is €13,000 (€250 x 52), which must be deducted from her rate band.
After Maternity Benefit is deducted, Beth’s rate band equals €27,000 (€40,000 - €13,000).
Her tax credits must also be adjusted to account for the 20% tax on Maternity Benefit. 20% of €13,000 equals to €2,600. This is reduced from the annual tax credit amount of €3550. Her revised annual tax credits equal to €950 (€13,000 x 20% = €2,600) (€3,550 - €2,600).
When Beth receives her wages from the start of February, it consists of two parts. €250 is her Maternity Benefit, and €450 is paid by her employer.
The Maternity Benefit amount has already been tax-adjusted. However, Beth will still have to pay PRSI, USC and Income Tax on the €450.
The €450 is taxed at 20%, with a gross tax of €90 due. However, when Beth's weekly tax credit of €18.27 (€950/52) is reduced, her net tax amount on the weekly wage is €71.73 (€90 - €18.27).
She also has to pay PRSI and USC in addition to the tax amount.
When she returns to work after maternity leave, Beth's annual tax credits and rate band will be readjusted to €3,550 and €40,000, respectively.
When an employee is on maternity leave across two tax years, the Maternity Benefit paid in the second year is taxed by reducing tax credits and the rate band on a cumulative basis.
This means the tax due for the second year is spread over the entire year.
Where the mother does not have enough tax credits and rate band to cover the taxation of the Maternity Benefit payments, Revenue will collect the remainder from the spouse or civil partner.
The standard rate of Maternity Benefit is €262 each week. Employees who take maternity leave are entitled to 26 weeks of Maternity Benefit.
So, if an employee has an entitlement to the standard payment, they will receive a full-rate Maternity Benefit of €6,812.
You will receive a half-rate Maternity Benefit if you qualify for Maternity Benefit and receive one of the following social welfare payments:
One-Parent Family Payment.
Widow's and Surviving Civil Partner's Pension contributions.
Widow's and Surviving Civil Partner's (Non-Contributory) Pension.
Prisoner's Wife's Allowance
Deserted Wife's Benefit or Allowance
A Surviving Civil Partner's or Widow's Widower's Pension under the Death Benefit Occupational Injuries Scheme.
Expectant mothers can take 26 weeks of maternity leave and receive Maternity Benefit for the entire term. They can also take a further 16 weeks of unpaid maternity leave if required.
3. Who Qualifies for Maternity Benefit?
Maternity Benefit is paid to women who:
Are employed, recently employed, or self-employed.
Take time off for maternity leave.
Meet the relevant conditions for PRSI contributions. PRSI (Pay Related Social Insurance) is a payment made by employers and employees.
You must complete an application form to qualify for Maternity Benefit as an employee.
Learn more about Maternity Benefit application forms and how to apply.
The Irish Department of Social Protection (DSP) provides family income supplements and social welfare payments like Maternity Benefit, Adoptive Benefit, and Child Benefit.
Maternity Benefit and other social welfare payments rely on a contributory system — citizens with a contract of employment must meet their tax obligations (like PRSI) to qualify for these benefits.
Ireland’s Maternity Benefit offers financial support for employees on maternity leave.
But that may not be enough for pregnant employees. They will also need health insurance coverage for consultations, vaccinations, antenatal classes, and more.
Fortunately, employers can use Yonder to provide private health insurance for their employees.
Once employers set up their contribution, employees can choose packages based on their needs, including add-ons for maternity extras.
Join Yonder to make sure your pregnant employees are cared for!
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