Vol. 506 No. 1
53 Mr. N. Ahern asked the Minister for Finance the taxation and benefits to widows under 65; if his attention has been drawn to the anger of many who feel aggrieved that their widow's contributory pension is taxed; if he will give special attention to widows in the next budget and remove taxation from widow's pensions; if he will give details of the last change; and the position regarding the court challenge to dependant child allowance paid to widows. [14745/99]
I am very conscious of the difficulties faced by widowed persons, and in particular widowed parents. It is therefore worth noting that widowed persons enjoy a more favourable tax regime than single persons. The taxation of widowed persons in the year of bereavement is at least as favourable as that of a married couple with the married allowance and double rate bands continuing, to apply. In the years following the year of bereavement widowed persons are entitled to a widowed person's allowance of £500, which is additional to the personal allowance of £4,200 at the standard rate, and the PAYE allowance of £1,000 at the standard rate. The widowed person's allowance was not standard rated in Budget 1999. In the case of widowed parents, they are entitled to the widowed person's allowance of £500 and they can also avail of the widowed parents allowance of £3,700, of which £2,650 remains allowable at the widowed person's marginal rate of tax. A widowed parent on PAYE is thus entitled to tax allowances amounting to £9,400, that is, the same as a married couple with one earner, and £3,150 of this remains allowable at the widowed person's marginal rate of tax. The existing, widowed parent's allowance includes the increase of £1,050 at the standard rate which I introduced in Budget 1999 with effect from 6 April this year.
In the years following the year of bereavement, a widowed person with dependent children is also entitled to a bereavement allowance. In the 1998 budget I extended the period of this allowance from three to five years and increased the allowance to £5,000 in year one, £4,000 in year two, £3,000 in year three, £2,000 in year four, £1,000 in year five and nil thereafter, with effect from 6 April, 1998.
Where a widowed person has a mortgage outstanding there is a provision in the income tax code allowing a widowed person to claim relief in respect of allowable interest of up to £3,600. The comparable figure for a single person is £2,500. A person in receipt of the social welfare widow's pension is not liable to the health levy of 2 per cent on not only his pension but on her entire income.
Widowed persons have, like other taxpayers, benefited from the general tax improvements introduced in the last two budgets, that is, the standard rate of the personal and PAYE allowances; the increase in the personal allowances of £1,300 single-widowed and £2,600 married; the increase in the widowed parent allowance of £1,300; the increase in the PAYE allowance of £200; the widening of the tax band by £4,100 single-widowed and £8,200 married and the 2 per cent reduction in both the standard and top income tax rates.
With regard to the taxation of the child additions to the social welfare widow's pension, the Supreme Court judgment in the Neenan case of 13 May 1998, upheld the current practice that a widow is liable to income tax in respect of the weekly widow's contributory pension including the portion paid in respect of each qualifying child resident with her. It should be noted that the Supreme Court decision did not alter the current tax treatment of social welfare recipients.
With regard to the taxation of the widow's pension, including the widow's contributory pension, I should point out that it is a general principle of taxation that, as far as possible, income from all sources should be subject to taxation. In line with this principle the majority of social welfare payments are, therefore, reckonable as income for tax purposes, including the social welfare widow's pension and its child dependant additions. This means that the widow's pension is combined with any other income a person might have for tax purposes.
