Turning 65 - what should exemption amount be on tax credits?
- Thread starter tommyboy
- Start date
W
willmy41
Guest
Are you saying anyone over 65 can have an income of €6800 a week before they are taxed? I recently turned 65 and noticed I no longer paid tax on my pension(s).
That is what I thought. But my Determination of Taxes just shows "Exemption E6,800 for the year!!!!, and the Tax Credit of E500 hasn't been included either.
Willmy41, did you get a Tax Certificate? Did you apply for the higher tax exemption, because I don't think it happens automatically.
Willmy41, did you get a Tax Certificate? Did you apply for the higher tax exemption, because I don't think it happens automatically.
Tommyboy.
I am no expert on this but this is the way I see it.
If you continued to be taxed the way you were taxed before retiring and lets say your salary was €34,000 per annum.
You would be liable for 34000 at 20% = €6800 tax /annum less your tax credits. (Married Tax credit 3260, PAYE Tax Credit 1490 and age Tax Credit 500 giving a total Tax Credit of 5250).
Your tax liability would be €6800-€5250=€1550/annum
Now because you are over 65 you do not get Tax Credits as such but you do get an Exemption from tax on the first €34000 of your pension.
So instead of paying as above €1550 tax you pay nothing but you will be taxed on any pension over €34000 at 40%
Hope this clears it up for you.
I am no expert on this but this is the way I see it.
If you continued to be taxed the way you were taxed before retiring and lets say your salary was €34,000 per annum.
You would be liable for 34000 at 20% = €6800 tax /annum less your tax credits. (Married Tax credit 3260, PAYE Tax Credit 1490 and age Tax Credit 500 giving a total Tax Credit of 5250).
Your tax liability would be €6800-€5250=€1550/annum
Now because you are over 65 you do not get Tax Credits as such but you do get an Exemption from tax on the first €34000 of your pension.
So instead of paying as above €1550 tax you pay nothing but you will be taxed on any pension over €34000 at 40%
Hope this clears it up for you.
W
willmy41
Guest
Tommyboy
I saw something on revenue site and applied for age credit. That must have done it.
I saw something on revenue site and applied for age credit. That must have done it.
Glenwalsh,
Thanks very much for your help. If only Revenue would make it as simple as you have. Can you explain something to me, what is the difference between P.A.Y.E. Tax Credits and Personal Tax Credits. I expect to be continuing to pay P.R.S.I. until I am 66. Should that credit show on the certificate. The Services Charges credit doesn't show either. If I was on a social welfare pension I would be exempt from service charges etc. and have the 34,000 tax exemption, naturally. As I will be still paying income and p.r.s.i. and will not have a social welfare pension I thought I woud be entitled to the credit over and above the standard exemption.
Standard Tax Credits. as they appear on my Tax Certificate.
Personal Tax Credits, 3260.00 + PAYE Tax Credit 2,980.00 + Age Tax Credit 500.00 + Service Charge 39.00 = Total Gross Tax Credits 6779.00.
65 and over Tax Credits. as they appear on my New Tax Certificate.
Exemption 6,8000
Gross Tax Credits = 6.800. aka exemption.
Difference. E21 a year
Thanks very much for your help. If only Revenue would make it as simple as you have. Can you explain something to me, what is the difference between P.A.Y.E. Tax Credits and Personal Tax Credits. I expect to be continuing to pay P.R.S.I. until I am 66. Should that credit show on the certificate. The Services Charges credit doesn't show either. If I was on a social welfare pension I would be exempt from service charges etc. and have the 34,000 tax exemption, naturally. As I will be still paying income and p.r.s.i. and will not have a social welfare pension I thought I woud be entitled to the credit over and above the standard exemption.
Standard Tax Credits. as they appear on my Tax Certificate.
Personal Tax Credits, 3260.00 + PAYE Tax Credit 2,980.00 + Age Tax Credit 500.00 + Service Charge 39.00 = Total Gross Tax Credits 6779.00.
65 and over Tax Credits. as they appear on my New Tax Certificate.
Exemption 6,8000
Gross Tax Credits = 6.800. aka exemption.
Difference. E21 a year
K
Keentoinvest
Guest
Hey Tommy
Im no pensions expert but i spoke with a friend of mine the other day who mentioned a loophole whereby if you invest 7000 euro of your SSIA into a pension with governent they will hand you back 2,500 bonus meaning you can lodge it and take it out a week later after turning 65.
Dont know if i believe it but if it works it could earn you a few quid
Im no pensions expert but i spoke with a friend of mine the other day who mentioned a loophole whereby if you invest 7000 euro of your SSIA into a pension with governent they will hand you back 2,500 bonus meaning you can lodge it and take it out a week later after turning 65.
Dont know if i believe it but if it works it could earn you a few quid
Hello Keentoinvest,
I have an SSIA, but I'm in a bit of a quandry. I hope eventually to get my tax situation sorted out. It looks as if I may be paying a small amount of tax - marginal relief at 40%, so I don't think it would be worth re-investing. On the other hand, if the 10,000 means that I would get a tax credit that would be a help. I'd have to pay on pension benefits at 40%. That is just my take on it. But I may be wrong!
Can your friend throw any light on this, because as far as I know all tax credits are taken off gross salary!
I have an SSIA, but I'm in a bit of a quandry. I hope eventually to get my tax situation sorted out. It looks as if I may be paying a small amount of tax - marginal relief at 40%, so I don't think it would be worth re-investing. On the other hand, if the 10,000 means that I would get a tax credit that would be a help. I'd have to pay on pension benefits at 40%. That is just my take on it. But I may be wrong!
Can your friend throw any light on this, because as far as I know all tax credits are taken off gross salary!
Keentoinvest said:
Would not call it a loophole more like an incentive brought in in this years finance act to encourage people to take up a pension or enhance their pension value. However you must be standard rate taxpayer to qualify which makes it useless to most taxpayers with a SSIA account
Also agree with CCOVICH pension drawdowns are subject to PAYE & potentially PRSI
Tommyboy,
Sorry for the delay in getting back to you but I headed away to the "sunny" SE for the wkend.
If you are given the Exemption then there will be no additional relief due on any further claims you might have e.g. health expenses etc. however if you calculate tax due by you using the Normal system and the exemption system you can ask to be taxed under the system that is more beneficial to you.
have a look at this
[broken link removed]
Sorry for the delay in getting back to you but I headed away to the "sunny" SE for the wkend.
If you are given the Exemption then there will be no additional relief due on any further claims you might have e.g. health expenses etc. however if you calculate tax due by you using the Normal system and the exemption system you can ask to be taxed under the system that is more beneficial to you.
have a look at this
[broken link removed]
Someone on AAM very kindly referred me to an extract from the "Post.ie" which explained marginal relief etc. Can anyone tell me where I can find it again.
There was something in the article about service charge credits etc. even with marginal relief. But they don't apply. No service charge credits etc if the marginal relief scenario is involved. Choices are, Over 65 stay as you are and get the various tax credits etc or go the marginal relief road. I just want to read the article again. ('cause if it's wrong I just might tell the author) and it I'm wrong
So if anyone can refer me to the "Post i.e." article I would be grateful.
There was something in the article about service charge credits etc. even with marginal relief. But they don't apply. No service charge credits etc if the marginal relief scenario is involved. Choices are, Over 65 stay as you are and get the various tax credits etc or go the marginal relief road. I just want to read the article again. ('cause if it's wrong I just might tell the author) and it I'm wrong So if anyone can refer me to the "Post i.e." article I would be grateful.