Updating of Revenue Records on Department of Social Protection (DSP) Pensioners
All figures based on 2012 information.
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.
The long-term pension information received by Revenue from the DSP has been updated into Revenue’s records and PAYE tax credits and rate bands have been adjusted for some taxpayers accordingly.
For some taxpayers, they will not notice any difference in the amount of tax they are paying simply because the pension information supplied to us by DSP was the same as the details that Revenue already had, while others will see an increased tax deduction because the pension figure supplied by DSP was greater than the figure that was already on Revenue records or Revenue had no record previously of that person getting a pension from the DSP. It is also possible that some taxpayers will see a reduction in the tax they are paying where the figure Revenue was using was greater than the actual DSP figure.
Miscellaneous Questions & Answers
Q1: Are pensions paid by the Department of Social Protection taxable?
A1: 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.
Q2: What has given rise to the change in some taxpayers PAYE tax credits and rate bands?
A2: Revenue is supplied with a variety of pension and income details from DSP on a periodic basis and this is updated onto Revenue’s records.
Q3: Under what legislation is information exchanged between DSP &Revenue?
A3: There is legislation that specifically allows DSP to share their pension and income details with Revenue – Social Welfare Consolidation Act 2005, Section 261.
Q4: How could it have happened that Revenue was carrying a different figure to the one they have recently been supplied with by DSP.
A4: Up until recently, Revenue would have been advised by the taxpayer when they became entitled to the receipt of a DSP pension. Once advised, Revenue would have updated its records with the DSP pension details. However, it is likely that over time, some of the changes that have taken place in the amount of the DSP pension paid to an individual, say because a person’s entitlement increased due to changes in their circumstances, would not have been fully reflected if the pensioner did not advise us of the revised amount and so Revenue’s records might have fallen out of line with the amounts actually paid by DSP.
Q5: How is tax deducted on DSP pensions?
A5: 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. For 2013, pension providers and employers have been advised of revised tax credit and rate band details reflecting the updated DSP pension amount. As a result, additional tax is deducted by a person’s pension provider or employer from any occupational pension or salary that the person has and this extra tax charge is spread evenly over the course of the year. 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.
Q6: Why does someone pay tax on their DSP pension even though their other income is very low?
A6: 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.
Q7: What is the position with any DSP pension that a person’s husband or wife or civil partner has, is that taxed?
A7: 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.
Q8: Is USC chargeable on:
- A pension paid to you by DSP
- An occupational pension paid to you by a previous employer ?
- USC is not chargeable on a pension paid to you by DSP.
- USC is chargeable on an occupational pension paid to you by a previous employer.
Q9. I have only been receiving a Social Welfare pension since 2012. What should I do?
A9. We will send you a Form 12S (PDF, 346KB) (which is a simplified return of income form) and you should send this form, duly completed, to your local Revenue office by 31 October 2013. Revenue will then issue a PAYE Balancing Statement to you for 2012 that will set out your final tax liability for the year. As you are a recent recipient of a DSP pension, you will not be liable for any penalties and, if you pay any tax due within one month of receiving the PAYE Balancing Statement, you will not be liable for interest either.
Q10: Can I get a review of my PAYE (PAYE Balancing Statement) done for 2012 if I require one?
A10: Yes. However, the up-to-date DSP pension amount will be taken into account in your Balancing Statement and an undercharge of tax might arise.
Q11: Can I get reviews of my PAYE (PAYE Balancing Statements) for any of the four years up to and including 2012 if I require them say to claim Health Expenses for prior years?
A11: Yes. However, the up-to-date DSP pension amount will be taken into account in your Balancing Statements for all relevant years and undercharges of tax might arise.
Q12: What is the position for a person receiving DSP pension to claim entitlement to the PAYE Tax Credit?
A12: 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.
Q13: What is my entitlement to the PAYE Tax Credit if I am a single person, a widowed person or a surviving civil partner?
A13: 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.
Q14: 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?
A14: 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.
Q15: 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?
A15: 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.
Q16: Are Social Welfare/Social Security pensions paid from another country taxable here?
A16: 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.
Q17: Are occupational pensions paid by an employer/pension provider in another country taxable here?
A17: 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.
Q18: What Social Protection payments, including pensions, are taxable?
A18: 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. Up to and including the 2011 tax year the first 36 days injury or Illness Benefit, interim Disability Benefit and Occupational Injury Benefit were exempt from tax. However, with effect from 1 January 2012 this exemption no longer applies to Illness Benefit, interim Disability Benefit and Occupational Injury Benefit.
The first €13 per week of Jobseeker’s Benefit and short-term Enterprise Allowance is exempt from tax.