Sick Pay is tax free…

We welcome any tax related questions to this web blog. A friend asked me an interesting question in relation to sick pay for PAYE and the possibility of a tax refund. Here is that point –

Q. I was off sick for 3 weeks in 2010, and my employers paid me full pay.

Cheques I got from the social welfare for sick pay I handed back to my employers.

A colleague mentioned I could be entitled to a tax rebate as sick pay is tax free. Is this true ?

A Yes, sick pay or illness benefit is tax free for the first 6 weeks of receipt.

To explain how it works here is an example.
Mary works in a pharmaceutical plant in Sligo Town. She is s paid €500.00 per week gross. She becomes ill in 2010, and was forced to sign on as sick for a number of weeks.

Her employers continue to pay her full wages. Mary sends any cheques she gets from the Social Welfare into her employers. She remains off sick for 7 weeks.

In January 2011, Mary receives her P60. Her total pay is €26,000, and as a single person she has paid tax €1,540. However, as Revenue were unaware of her sick leave, she has paid tax on her sick pay of €3,000. This, at 20% amounts to a refund due of €600 (for the six weeks and not seven only).

Mary files a return to Revenue, and a refund is processed.

REMEMBER – One can review 2010 – 2007 now to see if they are entitles to a refund.