Dáil Éireann Debate, Tuesday - 25 May 2021
198. Deputy Brendan Griffin asked the Minister for Finance the reason a qualified adult State pension to the spouse of a person (details supplied) is taxed as their income; if this income can be withdrawn from their tax assessment; and if he will make a statement on the matter. [28051/21]
View answerDepartment of Social Protection (DSP) payments are generally classified as income and as such are liable to income tax but not Universal Social Charge (USC) and PRSI. This includes the State contributory pension and any weekly payments for adult dependants.
The way in which tax is collected from DSP payments is dependent on whether a person is taxed through the PAYE system or through self-assessment. Where a person or couple have a PAYE source of income only, Revenue reduces their annual tax credits and rate band to take account of any taxable DSP payments, thereby ensuring the tax due is automatically collected through the payroll system. This normally means that the tax due on any taxable DSP payment is collected by reducing the tax credits on other income or private pensions. Individuals or couples who are taxed through the self-assessment system must include details of any taxable DSP payments in their annual income tax return (Form 11) and pay the tax due.
I am advised by Revenue that the couple in question who are ‘jointly assessed’ for tax have three sources of pension income, including a DSP contributory pension (including weekly adult dependant payments), a private pension and a foreign pension. The weekly adult dependant payments, while paid on behalf of the person’s spouse, form part of his DSP payment and are correctly taxed as part of the couple’s overall income. The couple’s annual tax credits and rate band have been reduced to take account of the tax due on the DSP pension and the private pension, the couple pay the tax due on the foreign pension through the self-assessment system.
Revenue has confirmed that it will make direct contact with the person to explain how DSP payments are taxed and to answer any other queries they may have regarding their tax position.
