Dáil Éireann debate -
Tuesday, 29 Jun 1993

Vol. 433 No. 1

Written Answers. - Tax on Pensions.

Noel Ahern

Question:

116 Mr. N. Ahern asked the Minister for Finance if he will alter the present system operated by the Revenue Commissioners whereby old age pensioners in the tax bracket are taxed on their social welfare old age pension increases from 5 April, although the increases only come into effect in late July, with particular reference to the case of a person (details supplied) in Dublin 11.

Minister for Finance (Mr. B. Ahern)

I have been advised by the Revenue Commissioners that tax on a social welfare old age pension is collected in two ways:

—by reducing a person's tax-free allowances by the amount of the pension where the person concerned is taxed under the PAYE system in respect of other income, or

—by assessment, together with other income subject to tax through the self assessment system.

Pensioners are taxed only on the amount of the pension received in the tax year. Where a person is taxed under the PAYE system the procedure is to spread the deduction evenly throughout the year. Most taxpayers would consider this an advantage. It is also administratively efficient as it obviates the need to issue a revised certificate of tax-free allowances in July when the pension increases are applied.

In the case mentioned in the representations the taxpayer's overall liability reduced from £1.83 per week to £1.82 per week as the increase in the social welfare pension was compensated for by an increase in the exemption limit. If the deductions in respect of the pension were not spread evenly through the year the tax due in the period to July would have been £1.46 weekly and from July onward would have been £2 weekly.