Dáil Éireann Debate, Thursday - 22 November 2012
63. Deputy Kevin Humphreys asked the Minister for Finance the level of money at which a pension becomes subject to the marginal rate; the number of pensioners that were subject to taxation at the standard rate in 2010; the number at the marginal rate in 2010; and if he will make a statement on the matter. [51936/12]
View answerThe current system of taxation provides that tax is to be charged on an individual’s income, or the joint income of a couple at the following rates:
- A single or widowed individual or a surviving civil partner without qualifying children; the first €32,800 @ 20%, with any balance @ 41%.
- A single or widowed individual or a surviving civil partner qualifying for One Parent Family Tax Credit; the first €36,800 @ 20%, with any balance @ 41%.
- A married couple or individuals in a civil partnership who are jointly assessed – where only one spouse or civil partner has an income source; the first €41,800 @ 20%, with any balance @ 41%.
- A married couple or individuals in a civil partnership who are jointly assessed – where both spouses or civil partners have income sources; the first €41,800 @ 20% (with an increase of up to €23,800 max in respect of the second income), with any balance @ 41%.
The tax chargeable is then reduced by the various credits that the individuals qualify for, as determined by their personal circumstances.
With regard to individuals aged 65 or over, section 188 of the Taxes Consolidation Act 1997 provides for exemption limits:
- For married individuals or civil partners, where either spouse or civil partner is aged 65 or over at any time during the tax year, the exemption limit is €36,000.
- In the case of single individuals, widowed individuals, surviving civil partners and married individuals or civil partners assessed as single individuals, who at any time during the tax year are aged 65 or over, the exemption limit is €18,000.
In addition, these exemption limits are increased by €575 in respect of each of the first 2 qualifying children and by €830 in respect of each subsequent qualifying child.
Marginal relief applies where an individual’s total income exceeds the exemption limit applicable to that individual, but does not exceed a sum equal to twice that limit.
In such circumstances, the individual is taxed at 40% on all income above the exemption limits to a ceiling of twice the exemption limit. However, the taxpayer is always given the benefit of the more favourable tax treatment as between marginal relief or the normal tax system.
Once the income exceeds twice the exemption limit, marginal relief is not available and the individual pays tax under the normal tax system on all his or her income. Exemption limits for individuals aged less than 65 years ceased to apply with effect from 1 January 2008.
Further information on all tax credits, reliefs and exemptions for over 65s is available from the Revenue website at the following link: http://www.revenue.ie/en/tax/it/leaflets/it45.html#section1
I am advised by the Revenue Commissioners that while social welfare pensions can be separately identified from other sources of income in Revenue statistics, it is not possible to do so in respect of income from other pensions. Consequently, there is no complete or reliable basis available to Revenue on which the number of pension income earners that were subject to taxation at the standard rate (20%) and at the higher rate (41%) in 2010 could be compiled.
However, information on the distribution of income earners aged 65 or over by income tax rate bands can be provided for income tax year 2010 as shown in the table below, based on incomes data derived from income tax returns held on Revenue records which have been grossed-up to an overall expected level to adjust for incompleteness in the numbers of returns on record at the time the data was extracted for analytical purposes.
Distribution of Income Earners aged 65 or over for 2010
|
Tax Year |
Exempt (standard rate liability fully covered by credits or age exemption limits) |
- |
Standard rate (including those whose liability at the higher rate us fully offset by credits) |
- |
Higher rate (liability not fully offset by credits) |
- |
All cases |
|
Numbers |
% |
Numbers |
% |
Numbers |
% |
||
|
2010 |
149,500 |
64.2 |
65,600 |
28.2 |
17,800 |
7.6 |
232,900 |
* Numbers are rounded to nearest hundred.
It should be noted that a married couple who has elected or has been deemed to have elected for joint assessment is counted as one tax unit.
