Avoid DIRT Increase with an Interest Up-Front Account

L

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I think this point deserves its own thread to highlight its importance.

DIRT is going up to 41% from 1 January 2014.

This can be avoided by getting paid interest, within 30 days of account opening, for a term deposit that exists into the future.

In particular, the below accounts now look very attractive.

Permanent TSB: Interest First Savings Account
  • 6 months 2.18%
    1 Year 2.45% **Highest 1 year rate**
    1 Year 6 Months 2.50% **High Rate**
    2 Years 2.50% **High Rate**
    2 Year 2 Months 2.50% **High Rate**
  • Minimum: €10,000.
  • This account pays interest within a month of opening the account.
  • Deposit Protection: €100,000 via Irish Deposit Guarantee Scheme.
Click to expand...

The above rates could drop at any stage (PTSB have not reviewed rates in a while). Also, as PTSB pay "within a month" of account opening stage, you would need to have the account opened at least a month before the new DIRT rates apply. In a nutshell, it might be worth acting fast.
 
KBC Interest upfront a good bet?

Hi there,
After PTSB, what is your opinion in terms of the 1-year Fixed Term Deposit with KBC? I understand they have changed their Terms and Conditions over the summer so withdrawing all ones funds if needs be is now no longer an option.
(I'd rather not do one of their variable a/cs given the times that are in it).
Thanks
Pugs
 
Will we be able to avail of the interest up front with DIRT @ 33% tomorrow I wonder?
 
if possible, you can close the accounts on Dec 31 and reopen a new account on Jan 1 or 2

Obviously, this is not possible on fixed term or regular savings accounts.

Ask the bank to pay any accrued interest by Dec 31 - some did this a couple of years ago when DIRT increased from 20% to 30%
 
RE: PTSB, KBC etc.

Thanks Ciaran for response! Yes, PTSB are a First deposit when looking at fixed term and safe bet. Still looking at a second and third potential bet. Looks like that's KBC and Ulster
Best wishes
Conservative Pugs
 
No problem. If you are after interest up front, to minimise your tax liability, Ulster Bank do not offer such a product. KBC and PTSB are your only options.
 
I had one of those Interest First deposits with PTSB and they charged me DIRT - it cant be that easy guys.
 
kmick said:
I had one of those Interest First deposits with PTSB and they charged me DIRT - it cant be that easy guys.
Click to expand...

The account is to avoid the upcoming increase in DIRT, not to avoid it altogether.
 
Exactly. It is about avoiding 2014 DIRT rates and 2015 DIRT rates by paying 2013 DIRT rates on income you will earn in the future! It is legal tax avoidance.

It can't be said strongly enough, that one needs to act urgently with this. PTSB probably will change these rates sometime in the near future. Also, you need to ensure the payment is made prior to 31 December 2013 and PTSB have a one month lag with the payment.
 
If Prsi etc is to be paid on savings interest from 2014 - would I be right in thinking the Interest First options from PTSB/KBC are now even more attaractive if you get your accounts opened and interest credited before the end of the year?
 
This has been mentioned by CiaranT elsewhere. I appreciate the advice, but we are talking about an 8% increase in DIRT and maybe an additional 4% PRSI if you don't pay it already. That's the percentage saved of an interest rate which itself will be no more than 2% to 2.5%. So total percentage saved is 0.16% to 0.3% ... or €160 to €300 on a €100k deposit, and this is once-off for year one. To me this would completely pale into insignificance compared to the risk of exposing another €100k to a risky Irish operation.
 
Threads merged.

The amount saved on a 2 year 2 month term deposit, of 100,000 EUR, in tax alone is 704.15 EUR.

((100000*0.025)*(0.45-0.33))*(26/12) = 704.15 EUR.

If you factor in the fact that:
(1) PTSB have the highest rates for this period and
(2) DIRT might rise again in 2014 and/or 2015 and
(3) deposit rates may drop further, then the saving is even greater.

I appreciate your comments about the risk attached to placing a deposit in an institution with an uncertain future but I personally think anything under 100k is low risk.
 
Got an e-mail from PTSB saying that the final dates for opening an Interest First account in 2013 are: -

  • 27th November if they want their interest paid before Christmas and
  • 4th December if they want to have their interest before the end of the year and thus DIRT taxed at 33%
We don't have a deposit agency with KBC so I don't know what their relevant dates are.
 
Thanks for sharing that important information Liam.

The reality is people may need to act before these dates to get in before any potential PTSB rate cut.

(I have merged the 2 interest up-front threads).
 
CiaranT,

For the sake of another 10 months.

Would it be better to invest the 100k in a NTMA 3 yr Bond - to be purchased in multiples and not in one lump sum as advised - as this is ONLY a further 10 months over the PTSB 2yr 2 months a/c - IF your timeframe is not that exact.
 
Nope, you are better off with PTSB rather than State Savings.

Lets compare 100k in PTSB versus 100k in State Savings for a comparable period.

PTSB return:
((100000*0.025)*(1-0.33))*(26/12) = 3,629.17 EUR.

State Savings return:
((100000*0.0132)*(1))*(26/12) = 2,860 EUR.

The return is much better with PTSB.
 
PTSB have started an large advertising campaign for this product. The dates in the advertisement are in line with what Liam posted above.

I am told that there has been a "surge" in applicants for the PTSB Interest First products in recent days.
 
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