I am advised by Revenue that it was informed by the Department of Employment Affairs and Social Protection (DEASP) that the person’s State Contributory Pension payment increased by €5 per week with effect from 6 January 2020.
In situations where a person has both a private pension and a State Contributory Pension from DEASP, the tax due on the latter (DEASP payment) is achieved by reducing the annual tax credits on the former (private pension) by the value of the DEASP payment.
For example, an increase of €5 per week in a DEASP payment means that tax on an additional €260 is to be collected over the course of the year by reducing a person’s tax credits. €260 extra income at the standard rate of tax of 20% gives rise to a reduction in tax credits of €52 for the year or €4.34 per month.
The person’s private pension provider applied the revised tax credits and rate band to the private pension payment of 1 March 2020 and, consequently, additional income tax was deducted on a cumulative basis back to the beginning of 2020.
While reviewing the person’s overall tax position, it was noted by Revenue, based on available information, that the person had not received his full credit entitlements. Revenue has adjusted his tax record to take account of additional tax credit and rate band entitlements and this has been reflected in his subsequent private pension payments. Revenue is satisfied that the correct tax is now being deducted from the person’s private pension.