Taxation of Paternity Benefit

Statutory paternity leave of 2 weeks together with a new Paternity Benefit has been introduced in respect of births and adoptions on or after 1 September 2016.

Paternity Benefit (including any increases for adults and child dependents), payable by the Department of Social Protection (DSP) is liable to tax. USC and PRSI will not apply.

As part of the on-going exchange of information arrangements between the DSP and Revenue, Revenue will receive details of the benefit payments which will be updated onto Revenue’s records.

Individuals who pay their tax through the PAYE system will, where possible, automatically have their annual tax credits and rate bands reduced by the amount of the Paternity Benefit payment.

Employers/pension providers will be advised of the adjusted tax credits and cut-off points on employer tax credit certificates (P2Cs).

As Paternity Benefit is being taxed by reducing employees’ tax credits and cut-off points on P2Cs, employers/pension providers are not to include figures for this payment on forms P45, P60 or P35L.

All queries relating to the payments should be directed to the DSP.