Key Post Deposits and tax liability beyond DIRT

patrickjd

Registered User
Messages
94
We (nearly) all pay dirt on deposits regardless of the tax rate we are on.
However, should a higher rate tax payer be declaring all interest earned to the Revenue and are they technically obliged to any pay interest over and above DIRT?
From previous posts it seems to be clear that the new Income levies do not apply to dirt subjected interest (Please correct me if this is incorrect)
However, several posters also mention that PRSI/health levy may apply.
If you do not reach the PRSI ceiling in a given year are you liable to pay an extra 8% (prsi plus health levy) over and above DIRT on your deposit interest earned?
This is such a vague area I would really love to know a definitive answer.
 

Joanne1

Registered User
Messages
105
Now I am concerned!

I assumed that the only interest to be paid was DIRT which I thought was deducted automatically by the bank.

Is a PAYE worker supposed to do a return to Revenue then showing the interest they earned? It would cost me more to get an accountant to do the return than the interest I receive.
 

patrickjd

Registered User
Messages
94


Hello,

This is the Revenue approved stance on this issue.


Inclusion of interest in tax return
Interest receipts should be included in the income tax return. However, where DIRT (whether at the 25% or 28% rate) has been deducted from that interest income, the tax payer has no further income tax liability.


Income Levy
The income levy does not apply to deposit interest.


PRSI
An employee who has no trading or professional income is not liable to pay PRSI on deposit interest received. However, a proprietary director would be liable to pay PRSI on any deposit interest received.


Health Levy
Deposit interest (other than such interest earned on a Special Savings Accounts ) is not exempted from the Health Levy.

In practice this means that if you are a PAYE employee earning small amounts of Interest on your deposits then the Revenue will not touch you but if you are on the Self Assessment system then they will hit you for DIRT AND the Health Levy on interest earned.


Hope this helps, maybe it might be useful as a key post too?

 

mathepac

Registered User
Messages
7,397
... Is a PAYE worker supposed to do a return to Revenue then showing the interest they earned? It would cost me more to get an accountant to do the return than the interest I receive.
A PAYE (or any other kind of worker) is legally obliged to declare all income.

Banks and other institutions will provide certificates showing gross interest paid, DIRT charged (if applicable to the account in question) and net interest credited. There is no need for an accountant; either ROS or the year-end Form12 has the appropriate sections for the return.
 

patrickjd

Registered User
Messages
94
So how many years then should you go back to declare the interest?


"In practice this means that if you are a PAYE employee earning small amounts of Interest on your deposits then the Revenue will not touch you."

Thus it would seem you are not obliged in practice to declare such interest i.e you won't be penalised for not doing so. (My interpretation).

If you are self assessed then I guess you have been incorrectly declaring your income to Revenue and need to give some thought to this matter.
 

ottobock

Registered User
Messages
26

Hello,

This is the Revenue approved stance on this issue.


PRSI
An employee who has no trading or professional income is not liable to pay PRSI on deposit interest received. However, a proprietary director would be liable to pay PRSI on any deposit interest received.



What is the definition of a professional income? E.G is a public servant liable for PRSI on deposit interest earned and at if so at what rate?

Also any links on all this? I tried to find some stuff on Revenue web site but to no avail.
 

Joanne1

Registered User
Messages
105
"In practice this means that if you are a PAYE employee earning small amounts of Interest on your deposits then the Revenue will not touch you."

Thus it would seem you are not obliged in practice to declare such interest i.e you won't be penalised for not doing so. (My interpretation).

That was my interpretation too.

I wonder what is considered to be small amounts of interest?
 

ottobock

Registered User
Messages
26
What is the definition of a professional income? E.G is a public servant liable for PRSI on deposit interest earned and at if so at what rate?

Also any links on all this? I tried to find some stuff on Revenue web site but to no avail.
Can anybody tell me more about this? I know about the Health Levy liability but what about PRSI?
I wonder will PRSI and the Health Levy have to be paid on the National Solidarity Bond interest or Saving Cert or Bonds gains?
 

frankmac

Registered User
Messages
192
Seems ironic that a selfemployed person should have to pay PRSI on deposit interest but a PAYE worker shouldnt.
 

Tentman

Registered User
Messages
256
Could this Key Post be updated to include the impact, if any, of the USC on Deposit Interest?
 
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