Big increase in 'Paid Tax' when some Credits were transferred to Private Pension

[DerekMP]

Hi, First of all I use Revenue Online for all my tax dealings. I will try to keep this as simple as I can.

I'm on full pension (less than €30K, taxed at 20%) from HSE since retiring in 6/2018 & a monthly private pension (€16.50 Gross). This small pension was taxed at 40% & last year when I cashed in half the investment it too was taxed at 40%. Since then (7/2019) I've been on to Revenue trying to have it taxed at 20% as I'm allowed to earn up to €34,144 at 20%. My combined HSE + Private pensions are below that figure.

In 11/2019 Revenue informed me that my "tax credits and cut off point were all allocated to HSE employment" & if I wanted "some of them transferred" to my private pension I should confirm that with them. However, Revenue also said 'this would mean that I would pay higher tax on my HSE pension'. I didn't understand this as my combined income was within the 20% band allowance. I tried to get an explanation but to no avail. I gave them permission 3/2020 to transfer credits and cut off point as outlined.

However, in 1/2020 the tax on my HSE pension increased by €71 per month, a 36% increase; my private pension tax reduced by €3 (income now €12 instead of €9 approx per month). No one in Revenue has been able to tell me how this came about.

At the end of 3/2020 Revenue informed me that my Tax Credits were amended for 2020 & a refund for 2019 would issue shortly. I've heard nothing from them since.
I do understand there might well be delays now due to COVID-19. I can live with that but I'm at a loss to understand how my tax could go up so much & without warning.

I'll leave it there. I would be grateful for any assistance in understanding this.

Thank you
Derek

 

[Just Retired]

The Second Pension Income (€16.50c per month) is most likely administered by one of the major insurance companies, i.e.Irish Life,Zurich etc. As your Standard rate cut off point (S.R.C.O.P) & Tax credits are allocated to your Main pension income, there are none allocated to the 2nd one. In that case the administrator is obliged to deduct, tax & usc on an "emergency basis". This is why the Revenue would like to allocate a portion of your SRCOP/Tax credits to your second pension. When the administrator receives this Certificate,then the emergency tax usc are removed and said tax & usc is deducted accordingly. Try this,assume the 2nd pension has a portion of all the credits/SRCOP allocated, now check this pay slip to see what tax/usc was deducted,write it down.Similarly do the same with the main pension income,write down deductions,now add Both tax and both usc's deductions,write them down. This part should confirm(Monthly based calculation) if the deductions are being made correctly. Add all of the incomes,check and ensure they are below SRCOP of €2,942.00c.(Per Month)If it is calculate tax @ 20% of the income, Now check both tax credits total them,and subtract from the tax calculated.(20% of all incomes )This calculation should equate with the tax deducted from BOTH payslips. If this is not the case, re-check all of your SRCOPS/Tax Credits. This calculation assumes it will be for a single taxpayer, and you receive your income on a monthly basis. The observation that tax increases with the Main pension and reduces with the second one,means that the allocation of SRCOP/Tax credits is most likely working correctly. I hope this is of assistance.

 

[DerekMP]

Thank you very much for your detailed response. Yes, single & monthly paid; I'll do calculations as suggested & see the outcome.
A monthly tax increase of €71 in main & tax reduction of €3 in private pensions doesn't seem right. As I'm worse off now should I have left things alone?

 

[DerekMP]

The Second Pension Income (€16.50c per month) is most likely administered by one of the major insurance companies, i.e.Irish Life,Zurich etc. As your Standard rate cut off point (S.R.C.O.P) & Tax credits are allocated to your Main pension income, there are none allocated to the 2nd one. In that case the administrator is obliged to deduct, tax & usc on an "emergency basis". This is why the Revenue would like to allocate a portion of your SRCOP/Tax credits to your second pension. When the administrator receives this Certificate,then the emergency tax usc are removed and said tax & usc is deducted accordingly. Try this,assume the 2nd pension has a portion of all the credits/SRCOP allocated, now check this pay slip to see what tax/usc was deducted,write it down.Similarly do the same with the main pension income,write down deductions,now add Both tax and both usc's deductions,write them down. This part should confirm(Monthly based calculation) if the deductions are being made correctly. Add all of the incomes,check and ensure they are below SRCOP of €2,942.00c.(Per Month)If it is calculate tax @ 20% of the income, Now check both tax credits total them,and subtract from the tax calculated.(20% of all incomes )This calculation should equate with the tax deducted from BOTH payslips. If this is not the case, re-check all of your SRCOPS/Tax Credits. This calculation assumes it will be for a single taxpayer, and you receive your income on a monthly basis. The observation that tax increases with the Main pension and reduces with the second one,means that the allocation of SRCOP/Tax credits is most likely working correctly. I hope this is of assistance.

Hi, I'm unclear how to post a reply to your very helpful information but thank you. Derek