Thousands of Irish pensioners have had a poor start to their New Year with news this week that their pension income may be set to drop. Correspondence from the Revenue Commissioners to 115,000 pensioners has detailed the amount of the reduction.
The move comes as a result of two State bodies, the Department of Social Protection and the Revenue Commissioners, sharing information that they hold on Irish taxpayers. Records pertaining to 560,000 pensioners were sent from the Department of Social Protection to the Revenue Commissioners and of those it was discovered that 115,000 pensioners have been underpaying tax.
The tax bills will affect people who are in receipt of both a state pension and a secondary private pension or salary. Anyone concerned about how they or their family may be affected can register here or text 'pension' 53131* for a tax consultation.
State pensions are taxable in the first instance however if a pensioner has no other source of income their State pension can be exempt from tax as it likely falls under the exemption thresholds. An individual aged 65 or over whose annual income is less than €18,000 for a single person or €36,000 for a married couple is exempt from tax. Individuals that have a secondary private pension that find themselves exceeding these thresholds are pushed into the tax net. The exchange of information between the two bodies has resulted in Revenue discovering that they were previously unaware of 115,000 cases of individuals in receipt of private secondary pensions also receiving the State pension. It is essentially a case of one State body not knowing what the other was doing. Those pensioners affected had never previously declared their State pension to the Revenue Commissioners, had under-reported their pension, or had had a change in circumstances. As Revenue are now aware of their increased combined income the individual pensioners will have a higher tax bill and as a result will take home a smaller pension.
This move by Revenue will ensure that from 2012 onwards pensioners should be paying the correct amount of tax on their pension income. It does not however address any outstanding liabilities from prior years as a result of under-declared income and Revenue have not ruled out collecting this tax as soon as they have analysed all of the data.
There is good news for approximately 20,000 pensioners however who will pay less tax as their pension income was overstated on Revenue's records.
As many pensioners may now have increased tax bills or indeed may find themselves paying tax for the first time on their pension income now is the perfect time for a tax consultation to ensure that all available allowances, credits and reliefs are being claimed.
If you're worried about how you have been affected, register here for a tax consultation or alternatively text 'PENSION' to 53131*
*Texts cost 30 cent plus one standard text message.