Updating of Revenue Records on Department of Social Protection (DSP) Pensioners

Introduction

As part of the ongoing exchange of information arrangements between the Department of Social Protection (DSP) and Revenue, Revenue receives information from DSP of long-term pension payment details covering the State pension, the Transition pension (paid to people aged between 65 and 66), Widow’s/Widower’s/Surviving Civil Partner’s and Invalidity pensions.

If someone receiving a DSP pension has no other sources of income, they will not be liable for income tax on the DSP pension. However if, in addition to the DSP pension, an individual also has an additional source of income – say an occupational pension from a former employer – they may be liable to tax on the DSP pension. A person who is 65 years of age or over may have a DSP pension and other income sources but may still not pay any tax if their total income for the year is less than €18,000, if single, or €36,000, if married or in a civil partnership.

The means by which a PAYE taxpayer pays income tax on their DSP pension is that Revenue reduces the taxpayer’s annual PAYE tax credits and rate band entitlements and this results in additional tax being stopped by their pension provider on their non-DSP occupational pension.

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Miscellaneous Questions & Answers

  1. Are pensions paid by the Department of Social Protection taxable?
  2. Under what legislation is information exchanged between DSP &Revenue?
  3. How is tax deducted on DSP pensions?
  4. Why does someone pay tax on their DSP pension even though their other income is very low?
  5. What is the position with any DSP pension that a person’s husband or wife or civil partner has, is that taxed?
  6. Is USC chargeable on a pension paid to you by DSP?
  7. Is USC chargeable on an occupational pension paid to you by a previous employer?
  8. What is the position for a person receiving DSP pension to claim entitlement to the PAYE Tax Credit?
  9. What is my entitlement to the PAYE Tax Credit if I am a single person, a widowed person or a surviving civil partner?
  10. What are our entitlements to the PAYE Tax Credit if we are a married couple or are civil partners and we both have a DSP pension in our own right?
  11. What are our entitlements to the PAYE Tax Credit if we are a married couple or are civil partners and only one of us is entitled to claim the full State pension plus a payment from DSP in respect of an Increase for a Qualified Adult?
  12. Are Social Welfare/Social Security pensions paid from another country taxable here?
  13. Are occupational pensions paid by an employer/pension provider in another country taxable here?
  14. What Social Protection payments, including pensions, are taxable?

1. Are pensions paid by the Department of Social Protection taxable?

Income tax legislation provides that a range of benefits payable under the Social Welfare Acts are taxable. Long-term pensions like the contributory old age pension, for example, are consequently taxable. Where a DSP pension is a person’s only source of income, that person will not pay tax on the pension. However, an individual in receipt of a DSP pension who also has a second source of income may indeed be liable for tax.

2. Under what legislation is information exchanged between DSP &Revenue?

There is legislation that specifically allows DSP to share their pension and income details with Revenue – Social Welfare Consolidation Act 2005, Section 261.

3. How is tax deducted on DSP pensions?

No tax is deducted at source by DSP on any pensions they pay. Instead, a DSP pension recipient who pays their tax through the PAYE system will have their annual PAYE tax credits and rate bands reduced which will result in additional tax being stopped from any other income they have. A self-employed person is obliged to return details of any social welfare pensions that they have on the annual Form 11 return form and they pay tax on any DSP pensions they have when they are making their annual income tax payment.

4. Why does someone pay tax on their DSP pension even though their other income is very low?

A person is exempt from Income Tax if they are 65 years of age or over and their annual total income is less than €18,000 if single, or €36,000 if married or in a civil partnership. In some cases, where the total income exceeds these amounts the combination of tax credits that a person is entitled to will be sufficient to cover any tax due. However, in other cases, the value of their credits will not be sufficient and tax will be deducted by their pension provider or employer.

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5. What is the position with any DSP pension that a person’s husband or wife or civil partner has, is that taxed?

Like DSP pensions in general, this too is taxable. If the amount paid by DSP includes a portion for someone’s husband or wife or civil partner and the couple are jointly assessed, the full amount of the DSP pension will be reflected on the Tax Credit Certificate under the assessable spouse or nominated civil partner.

6. Is USC chargeable on a pension paid to you by DSP?

USC is not chargeable on a pension paid to you by DSP.

Further information regarding USC.

7. Is USC chargeable on an occupational pension paid to you by a previous employer?

USC is chargeable on an occupational pension paid to you by a previous employer.

Further information regarding USC.

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8. What is the position for a person receiving DSP pension to claim entitlement to the PAYE Tax Credit?

In order to qualify for entitlement to the PAYE Tax Credit, a person must have PAYE income in his/her own right. This is the case for all taxpayers and not only for persons who receive a pension from DSP.

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9. What is my entitlement to the PAYE Tax Credit if I am a single person, a widowed person or a surviving civil partner?

For a single person, a widowed person or a surviving civil partner who has a DSP pension, the position is that they are entitled to the full PAYE tax credit (currently €1,650 per annum) provided their total income for the year exceeds €8,250.

10. What are our entitlements to the PAYE Tax Credit if we are a married couple or are civil partners and we both have a DSP pension in our own right?

For married couples and civil partners who both have DSP pensions in their own right, both spouses/civil partners are entitled to the full PAYE tax credit for the year provided their total income in their own right (including their DSP pension) for the year exceeds €8,250.

11. What are our entitlements to the PAYE Tax Credit if we are a married couple or are civil partners and only one of us is entitled to claim the full State pension plus a payment from DSP in respect of an Increase for a Qualified Adult?

Where one spouse/civil partner receives the full State pension, they are entitled to the full PAYE tax credit provided their income for the year exceeds €8,250. A second PAYE tax credit is not due simply because the Increase for a Qualified Adult payment is paid directly to the Qualified Adult.

12. Are Social Welfare/Social Security pensions paid from another country taxable here?

Yes. Irish resident individuals are taxable here on any Social Security pensions they receive from another jurisdiction and any such amounts received should be notified to Revenue.

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13. Are occupational pensions paid by an employer/pension provider in another country taxable here?

Yes. Irish resident individuals are taxable here on any occupational pensions they receive from another jurisdiction and any such amounts received should be notified to Revenue.

14. What Social Protection payments, including pensions, are taxable?

Pensions and other payment liable to tax are shown below:

  • State Pension (Contributory)
  • State Pension (Non-Contributory)
  • State Pension (Transition)
  • Illness Benefit
  • Invalidity Pension
  • Occupational Injury Benefit
  • Interim Disability Benefit
  • Disablement Benefit (when payable in the form of pension rather than as a one off payment)
  • Death Benefit Pension
  • Widow's/ Widower's or Surviving Civil Partners (Contributory) Pension
  • Widows’/Widowers’ or Surviving Civil Partners (Non-Contributory) Pension
  • Deserted Wife's Benefit
  • Deserted Wife's Allowance
  • Prisoner's Wife's Allowance
  • One-Parent Family Payment (Unmarried parent, Separated Spouse, Prisoner’s Spouse)
  • Guardian’s Payment (Contributory)
  • Guardian’s Payment (Non-Contributory)
  • Carer’s Allowance
  • Carer’s Benefit
  • Jobseeker's Benefit and Short-Term Enterprise Allowance, excluding Jobseeker’s Benefit paid to systematic short-term workers
  • Unemployability Supplement (payable with Disablement Pension)
  • Blind Pension
  • Constant Attendance Allowance (payable with Disablement Pension)
  • Maternity Benefit (effective from 1 July 2013).

Note: In the case of Jobseeker's Benefit, Illness Benefit, interim Disability Benefit and Occupational Injury Benefit any child dependent element is exempt from tax.

The first €13 per week of Jobseeker’s Benefit and short-term Enterprise Allowance is exempt from tax.

May 2016

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