Pension bombshell won't hit everyone

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Irish Independent Farming

17 January 2012 

 

Letters recently issued to farming pensioners regarding the alleged underpayment of taxes have caused a lot of distress and confusion.

The Revenue have decided to reduce pensioners' tax credits and standard rate tax bands to account for this income.

Effectively, this means that the tax on the State pension will be collected at source via the PAYE system by increasing the weekly or monthly tax paid on pensions subject to PAYE tax at source.

However, many of the pensioners that got these letters will not be subject to additional taxes.

If you think you might be liable for additional taxes, here's some important starting points.

The most common pension for farmers is the State contributory pension, which is available to those who have made sufficient PRSI contributions.

The basic rate for a person under 80 is €230.30 per week, or €11,975.60 per annum.

The tax on this income depends on the tax credits available to the person, his/her standard rate tax band, and his or her other income. If the entire amount is taxable at 41pc, with no tax credits available, the tax liability will amount to €4,910 -- a substantial annual figure.

If the total income for this year does not exceed the exemption limits of €18,000 for a person who is single, widowed or a surviving civil partner, and €36,000 for persons married or in a civil partnership, no tax is due on the Department of Social Protection pension. These limits apply solely to persons aged 65 years and over.

 

Aidan O'Boyle is a manager in Grant Thornton's Tax department.