Double tax blow for families with savings and rental property

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MOULTON

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The Department of Finance has clarified that anyone with income of over €3,174 from rent and savings will have to pay PRSI (pay-related social insurance) on the interest

was also confirmed that non-PAYE income also includes dividend and investment income.

The move means people with buy-to-let properties are likely to be pushed into paying PRSI on their savings, as well as their rental income.

They will have to file an income-tax return, according to the Departments of Finance and Social Protection.

Thousands of families that have been forced to rent out their homes because they cannot afford the mortgage are set to be the biggest losers from the new double-whammy tax move.

These so-called "accidental landlords" will now have to include any interest they get from their savings along with rental income and make a return to the taxman.
 
As I see it you now add your taxable amount from your form12 to the amount of interest earned in any savings and if that figure exceeds €3,174 you are liable for PRSI. Some questions.

1) Is it the gross interest from savings or net ?
2) Are you liable for PRSI on the total taxable pay or just what exceeds €3,174 ?

Example:
Apartment rented for 800 p.m. - 9600
Costs deductible for interest, fees etc 7100
Taxable amount 9600 - 7100 = 1500

Interest on savings of 100k @ 2% = 2000 - Dirt paid 800

So is the taxable amount
= 1500 + 2000 = 3500
Or
= 1500 + 1200 = 2700

Seeing as you paid dirt direct I would imagine 2700 so thus under the amount.
BUT
if its 3500 are you liable for 4% on 3500 or just the difference above 3174 ?
 
The 4% PRSI will be on the gross interest paid.

Now, I'm not sure will it be on gross rent, or net rental profit?
 
So if your rental profit plus your gross savings interest are below 3174 you pay no PRSI ?
 
I doubt you'd have much by way of savings if you are an "accidental landlord". Accidental landlords typically have had to move for personal reasons and rent out their former homes. They typically have to rent out their former homes because it's in negative equity....ie, it has a mortgage outstanding. Unless the owner has an attractive tracker it's unlikely that having a load of cash on deposit is financially sensible, when it could be used to reduce the mortgage principal. If people have boom time mortgages they are probably paying more in interest alone than the rent. Coupled with other allowances it's unlikely there's any profit to pay PRSI on.

In reality, these measures will not affect "accidental landlords" much at all IMO.
 
it's unlikely that having a load of cash on deposit is financially sensible, when it could be used to reduce the mortgage principal.
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In my opinion there are many that have let out their home and have moved and are actually choosing to save a deposit rather than pay off the mortgage. If you are in NE and have it rented out in most cases it would be better to leave as much interest relief on the house as possible. The gain of reducing your mortgage is offset by the fact that you have to pay income tax on 100% of the savings as oppose to only 25% if you don't pay off. It also gives people a chance to move on and get settled where they would like now that the house prices have settled to 'normal' rates.
 
I would have thought saving for a deposit would be a fruitless endeavour. No lender is going to offer any credit to someone with an outstanding mortgage, so what's the point in saving for a deposit? Or am I totally wrong here?
 
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