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'Welfare is not just for those out of work. Here's what you can claim'

Charlie Weston and Karl Deeter’s new book, This Book Is Worth €25,000, is full of tips on how to save money and stop getting ripped off. In this extract they talk about the welfare payments that families are entitled to.

Charlie Weston and Karl Deeter Personal finance experts

WELFARE PAYMENTS FOR middle-income families? What’s this nonsense? Sure, welfare is only for those out of work, or the poor, you might be thinking.

You would be forgiven for thinking we have lost the run of ourselves. But bear with us for a bit. The truth of the matter is that welfare payments for families in this country are so generous that when child benefit and tax provisions are taken into account, a family with two children, on the average wage, is a net beneficiary of the system.

And don’t take our word for it. That is the view of the international think tank, the Organisation for Economic Cooperation and Development (OECD).

The Paris-based organisation points out that child benefit is generous in Ireland. For two children you get €280 in child benefit in 2017. “Taking into account child-related benefits and tax provisions, the employee net tax burden for an average married worker with two children in Ireland was reduced to 0.2pc in 2014, which is the lowest in the OECD, and compares with a reduction to 14.8pc for the OECD average,” said the OECD in a recent tax trends report.

In other words, a family with two children gets back roughly what it pays into the system. But don’t think of it as welfare. Think of it as making a claim to the Department of Social Protection for the pay related social insurance (PRSI) everyone in work has to pay.

Where the problem lies

The OECD argument is that an average married worker with two children in Ireland had take-home pay, after tax and family benefits, of 99.8% of their gross wage compared to the OECD average of 85.2%.

However, it is worth pointing out the dangers of like-for-like comparisons with other countries. It’s also worth noting that couples in Ireland face high childcare costs that are subsidised in other countries. The OECD data includes PRSI contributions, but does not take account of other taxes faced by families, including property tax and other charges.

Given all that, it is worth spelling out that welfare for families comes not just in the guise of child benefit. Families on low incomes benefit from the Family Income Supplement, and all families, where there is a stay-at-home parent, are entitled to the home carer’s tax credit.

How to fix it

Make sure you get every payment your family is entitled to receive. Between child benefit, a medical card, the home carer’s tax credit and family income supplement, the direct payments from the State to families are generous in this country.

The savings explained

Child benefit (previously known as children’s allowance) is payable to the parents or guardians of children under 16 years of age, or under 18 years of age if the child is in full-time education, Youthreach training or has a disability. Once the child reaches 18 years of age it is no longer paid.

Let’s assume most families that are entitled to child benefit are getting the payment. But a large number of families are entitled to a key tax credit aimed at families, but are not claiming it, namely the home carer’s tax credit.

The home carer tax credit is not just for those caring for other people’s children, the elderly or disabled people. Many people don’t realise that it can be claimed where any housewife or househusband works in the home, caring for their own children.

Strictly speaking, it is not a welfare payment, but we have included it as it is a significant benefit for families. The tax credit is worth €1,100 in 2017.

A tax credit is basically an amount of tax that you do not have to pay. The home-carer’s tax credit is available to any jointly assessed couple with one or more child, where the spouse has income of less than €7,200. However, if you work part-time and earn more than this you may still qualify for some of the tax credit.

Maternity and paternity benefit

Maternity benefit is another social welfare payment which women are entitled to for paying PRSI. It is paid by the Department of Social Protection for 26 weeks, two of which are before the baby’s birth. The rate in 2017 is €235 a week. A generous employer can pay you your full salary. In that case you are likely to have to refund the employer the benefit.

Income tax is charged on maternity benefit payments, but not the universal social charge (USC) or PRSI. However, if maternity benefit is your sole income you will not have to pay tax on it. You need to apply at welfare.ie for the benefit between two and 16 weeks before the delivery date.

Paternity benefit is a payment for employed and self-employed people on paternity leave from work, and who are covered by PRSI social insurance. It is paid for just two weeks and is available for any child born or adopted on or after 1 September 2016. You can start paternity leave at any time within the first six months following the birth or adoption placement.

You should apply for the payment four weeks before you intend to go on paternity leave (12 weeks if you are self-employed). If you are already on certain social welfare payments, you may get half-rate paternity benefit. The weekly rate from March 2017 is €235. One-parent family payment is a means-tested benefit payable to those caring alone for children under seven, and earning less than €425 a week, including any maintenance payments. The rate is €193 per week plus €29.80 for the child.

Family income supplement (FIS) is a weekly tax-free payment available to married or unmarried employees with children. It gives extra financial support to people on low pay. You must have at least one child who normally lives with you or is financially supported by you. Your child must be under 18 years of age or between 18 and 22 years of age and in full-time education.

To qualify for FIS, your net average weekly family income must be below a certain amount for your family size. The FIS you receive is 60% of the difference between your net family income and the income limit which applies to your family. If you are getting FIS you may also be entitled to the Smokeless Fuel Allowance and the Back-to-School Clothing and Footwear Allowance.

No matter how little you may qualify for, you will still get a minimum of €20 each week.

Time

It will take just a few hours to claim child benefit from the Department of Social Protection, the same for the home-carer’s tax credit from the Revenue Commissioners, and the same again when it comes to making an application for family income supplement from the Department of Social Protection.

Difficulties

Claiming these benefits, and the tax credit, is not difficult. Contact your local Citizens Information Board office if you are unsure what to do, or need forms to fill out.

Some things to watch out for

Once you qualify for family income supplement, it will be paid for 52 weeks while you are employed. At the end of the 52 weeks you can re-apply for it if you continue to be eligible.

If your wages go up or your spouse starts work, your family income supplement will not be reduced until the end of the 52 weeks.

Useful websites

A good place to start is citizensinformation.ie, which is far easier to follow than the websites of Revenue (revenue.ie) or the Department of Social Protection (welfare.ie).

This Book Is Worth €25,000 is the best-selling book from Ireland’s top personal finance minds, Charlie Weston and Karl Deeter. The book is published by Gill Book, priced €12.99.

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Charlie Weston and Karl Deeter  / Personal finance experts

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