Tax on deposits accounts

J

Jimmy Bond

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I am a PAYE worker on the higher rate of tax (~42%). Apart from the mandatory 20% DIRT tax that is taken from interest on deposit, am I liable to pay any more tax on the interest earned?
 
No - DIRT is the full extent of your tax liability. You may still need to declare interest if/when making a Form 12 return. In some cases PRSI may be due on deposit interest but I'm not sure when (it was mentioned in a few other threads as being a possibility in some cases). Note that the current high rate of income tax is 41% and no longer 42%.
 
Thanks ClubMan,

One other question on the Form 12 that you mentioned, I normally return it each year to claim tax allowances ..etc. One section that I have never completed is the Special Savings section and I have an SSIA account for the last 5 years. Is this important as I have always overlooked (actuallly forgot) filling in the details on the SSIA account? Thanks.
 
Note:

SSA is not the same as an SSIA.

SSAs are mentioned on the Form 12, these are not the same as an SSIA.
 
As far as I know you should not declare SSIA details on Form 12. I have always just declared interest on standard savings from which DIRT has already been deducted in the Irish Deposit Interest section of the form.
 
Jimmy Bond said:
I am a PAYE worker on the higher rate of tax (~42%). Apart from the mandatory 20% DIRT tax that is taken from interest on deposit, am I liable to pay any more tax on the interest earned?
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Jimmy the only time you will be liable for more than the D.I.R.T. already stopped on your interest is if your income from outside P.A.Y.E. employment exceeds €3,174 (IR£2,500) as this is when self employed P.R.S.I. kicks in. If you send in a Form 12 with other income exceeding this amount tax office will issue a self employed notice of assessment instead of the usual P21 balancing statement and charge you P.R.S.I. and health levy also if applicable.
 
I recall there being something about SSIAs on older form 12, but I can't see any place to declare one on the 2006 form 12.

See here:

[broken link removed]
 
Clarkey.. If I earned €5000 in interest last year... is this considered income outside of PAYE? If yes, what am I likely to owe?
 
Jimmy Bond said:
Clarkey.. If I earned €5000 in interest last year... is this considered income outside of PAYE? If yes, what am I likely to owe?
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On €5,000 deposit interest (Assumed gross amount before D.I.R.T) you will owe p.r.s.i. of €150 (3%). If you earned more than €22,880 in total last year you will also be liable for health levy of €100 (2%)
 
Jimmy Bond said:
Clarkey.. If I earned €5000 in interest last year... is this considered income outside of PAYE? If yes, what am I likely to owe?
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I filed a tax return for 2005 and declared €5600 in deposit interest. I was assessed for ~€170 in PRSI and levies.
 
The question about whether or not the deduction of DIRT fully satisfies ones tax liability is unclear to me. On different parts of the Revenue site I have read:
The payment of retention tax at the standard rate by individuals liable to income tax at the higher rate is regarded as satisfying the individuals' full liability to tax.
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Yet elsewhere there is a suggestion this isn't the case. Q 16 on Form 12 asks one to list the gross interest received and the number of Irish deposit accounts from which DIRT is deducted.

I'd very much like to know when is the 2% Health levy payable. Is Clarkey correct in saying that it's only when deposit interest exceeds €22,880 (2006) that this levy is owed? I'd be very grateful if you could show where this is stated on the Revenue site. I have declared Credit Union interest from which DIRT was deducted and charged myself the 2% levy. I think this was accepted by Revenue and not refunded.

There's a document on the Revenue site which I don't really understand.
It says these are guidelines which do not have the force of law and as such reflect a standard of best practice! I suppose tax experts would understand this but I don't. Here is an extract and the link (I think it may only apply to banks etc which pay interest:
While the operation of a distinct lower rate of DIRT by the deposit-taker no longer applies, interest on such accounts will continue to be disregarded as part of the depositor’s total income as defined for tax purposes. Consequently, such interest:
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· is not required to be disclosed in the depositor’s return of income, and
·is not liable to PRSI/levies.
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[broken link removed]
 
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The revenue don't consider the Health Levy to be a tax on income, so their statement that DIRT fully satisfies your tax liability is correct in their view. To everyone else, the health Levy is another tax on income that dares not call itself as such. It should be abolished in my view. Talk about sneaky terms and conditions.

PRSI is of NOT a tax at all - although to most people it is difficult to see the difference between it and normal bog standard income tax.
 
sherib said:
I'd very much like to know when is the 2% Health levy payable. Is Clarkey correct in saying that it's only when deposit interest exceeds €22,880 (2006) that this levy is owed? I'd be very grateful if you could show where this is stated on the Revenue site. I have declared Credit Union interest from which DIRT was deducted and charged myself the 2% levy. I think this was accepted by Revenue and not refunded. [broken link removed]
Click to expand...

When TOTAL income exceeds €22,880 then the health levy is charged as per my previous post.
 
If a person with investment income and no trading income has had prsi deducted from paye income they are only liable to the health contribution on investment income.

The following examples from the revenue guide to completing tax returns illustrate:


"Examples to show the liability to PRSI and Health Contributions where an individual has different sources of income are set out below.​


Where an individual has employment income that has already suffered PRSI at source, the liability to the Self-Employed (class S) PRSI depends on the type of income the person has. ​


The following examples will help show the liability to PRSI where an individual has different sources of income.​


Example 1
Individual with employment income and no trading income:
Employment income £30,000
Investment income £50,000
PRSI class S liability nil
Health Contribution £50,000 @ 2%​


Example 2
Individual with employment income, investment income, and trading income:
Employment income £30,000
Investment income £50,000
Trading income £20,000
PRSI class S liability £70,000 @ 3%
Health Contribution £70,000 @ 2%​


Example 3
Individual with employment and trading income:
Employment income £30,000
Trading income £22,000
PRSI Class S liability £22,000 @ 3%
Health Contribution £22,000 @ 2%​


Example 4
Individual with investment income:
Investment Income £50,000
PRSI Class S liability £50,000 @ 3%
Health Contribution £50,000 @ 2%​


Example 5
Individual with trading and investment income:
Trading income £22,000
Investment income £50,000
PRSI Class S liability £72,000 @ 3%
Health Contribution £72,000 @ 2%​


Example 6
Individual with trading income:
Trading Income £22,000
PRSI Class S liability £22,000 @ 3%
Health Contribution £22,000 @ 2%​
​
 
Hi,
Am trying to sort out our tax liabilities for 2006 using Form 11 sent to us by Revenue. Due to my husband's unemployment since Feb '06 and to my low income, we're in the 20% tax rate. Do we have to declare the interest earned in 2006 even though some DIRT had been deducted at 20%?
thanks, allendog
 
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