A new universal social charge is being introduced to replace the income levy and the health levy. The universal charge will be applied at a rate of 2% up to €10,036, 4% above that amount but below €16,016 and 7% above €16,016. A lower exemption threshold of €4004 will apply. Income earners over 70 years of age will not be liable for the higher rate of 7%. As with the levy, payments made by the Department of Social Protection will be exempt from the universal social charge. The charge is more equitable and has a wider base and lower rate when compared with the combined income levy and health levy. It is designed to apply across income levels in a smoother progression while addressing the irregularities caused by the step effects in the current system of levies and PRSI. The current combination of income levy, health levy and PRSI create a number of anomalies due to the entry point steps to each of these charges. The health levy has a step of 4% to €26,000, which results in an anomaly whereby an individual earning €25,500 per annum can receive an increase in income of €1,000 but only €320 in net pay. The introduction of the universal charge will resolve this issue. An individual on €25,500 who receives an increase of €1,000 will now be €690 better off. The charge is the first step in removing the irregularities due to the combination of levies and PRSI in the current system. The charge is revenue neutral in 2011 and will yield €420 million in a full year.

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