Key Post Deposit Interest and Tax Liability Beyond D.I.R.T.

We (nearly) all pay dirt on deposits regardless of the tax rate we are on.
However, should a higher rate tax payer be declaring all deposit interest earned to the Revenue and are they technically obliged to any pay interest over and above DIRT?

From previous posts it seems to be clear that the new Income levies do not apply to dirt subjected interest.

However, several posters also mention that PRSI/health levy may apply.

[SIZE=+0]Upon further investigation and according to correspondence from The Revenue Commisioner the situation appears to be as follows:


Inclusion of interest in tax return
Interest receipts should be included in the income tax return. However, where DIRT (whether at the 25% or 28% rate) has been deducted from that interest income, the tax payer has no further income tax liability.


Income Levy
The income levy does not apply to deposit interest.


PRSI
An employee who has no trading or professional income is not liable to pay PRSI on deposit interest received. However, a proprietary director would be liable to pay PRSI on any deposit interest received.


Health Levy
Deposit interest (other than such interest earned on a Special Savings Accounts ) is not exempted from the Health Levy.

In practice this means that if you are a PAYE employee earning small amounts of Interest on your deposits then the Revenue will not touch you but if you are on the Self Assessment system then they will hit you for DIRT AND the Health Levy on interest earned.


In conclusion it would seem PAYE workers are not obliged in practice to declare such interest i.e. you won't be penalised for not doing so.
If you are a self assessed tax payer then It would seem you have been incorrectly declaring your income to Revenue and need to give some thought to this matter.
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My understanding has always been as stated in the above key post - i.e.DIRT deducted at source means no further tax liability. However I am considering An Post Bonds or Certs which do not attract DIRT at source. I notice that section16 of revenue Form12 annual return asks for "Gross interest received (on which DIRT was not deducted)" & also for "Gross interest received in the period (on which DIRT was deducted at 25%)".

Are you sure I will not have a "non-DIRT" tax liability and could this be at the higher rate? I am in PAYE system. The post above also says a PAYE taxpayer can legitimately leave the interest earned fields blank but is this still the case for the "Non-DIRT" earned interest.

Quite an old post to drag up, but... can anyone confirm if this is still accurate?

Speaking to the PAYE department in Revenue last week, it took around 10minutes for the woman I spoke with to actually understand my question.. so I'm not quite sure I trust her response on its own (which was that after DIRT, there is no further liability for a PAYE worker).

Earlier this year I declared additional income on PAYE online, which was mainly dividends. I also added in interest earned on deposit as most of my deposits are outside the country. From what I could tell on the p21 I was not charged anything other than DIRT on interest.

can anyone clarify this position. What is the position for tax on deposit interest for a PAYE worker and a self employed individual after DIRT deductions. Many thanks

laois1 said:

can anyone clarify this position. What is the position for tax on deposit interest for a PAYE worker and a self employed individual after DIRT deductions. Many thanks

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Already clarified for you by myself and DB74 last week the last time you were asking about it!:

DB74 said:

There is no PRSI on rental income for someone who is not a "Chargeable Person" (eg a PAYE worker/employee)

There IS PRSI on rental income for someone who is a "Chargeable Person"

From 01-Jan-2013 PRSI will be charged on rental income for everyone, even PAYE workers

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Madelbrot - this time I m asking about DEPOSIT interest not PRSI on rental income. They are different I believe...apologies if I m repeating something...thanks

laois1 said:

Madelbrot - this time I m asking about DEPOSIT interest not PRSI on rental income. They are different I believe...apologies if I m repeating something...thanks

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No difference - the same principle applies to how PRSI is assessed (or not) on various types of unearned income.

If you are a PAYE worker then with Deposit Interest as your only other source of income apart from the PAYE Income then will you have to pay PRSI and do a Tax Return for 2013 ?

Would anyone with a Deposit Account earning interest have to declare it to Revenue and pay PRSI ? What about Children's Accounts ?

I'm a PAYE worker who also receives royalties for a work published several years ago. I also receive shares from my employer from time to time. Will I have to pay extra tax on top of DIRT for fixed term deposits? Is there a document explaining in detail what qualifies as extra professional income and how much to extra to pay?

Thanks.

Tax on deposit intrest earned

Hi,
I'm new here although I'm an avid reader for years and find the forum very helpful and informative.
Basically my query is - I'm a PAYE worker, I filled in my income tax Form 12 for 2012, I declared the interest earned on savings after DIRT and enclosed certs. for banks etc.
The revenue office issued me with a demand for income tax @41%,
PRSI @4% and Universal Social Charge @7% on the intrest earned, they say it's income and is treated as such.....could this be correct ??
I was of the opinion that once DIRT was deducted at source by the bank that I was not liable for any other form of tax on this interest.
Could someone please throw some light on this for me.
Thank You.

While it looks that you were charged tax at 41 percent. You should find in panel 8 of your assessment a " retention tax credit " which in effect ensures that no income tax is effectively charged on your deposit interest. Not sure about prsi. It can be due in certain circumstances and USC does not apply to deposit interest that has been subjected to dirt. Hope I am correct , not a tax expert.

Do you have a copy of the form you sent? Are you sure you entered the interest in the correct place? USC should not be charged on deposit interest, as rayn says.

For most people, you do not pay anything other than DIRT on deposit interest. It is accounted a bit strangely on a tax statement -- it shows as taxed income, but you then get a credit for the tax paid, so you end up paying only the DIRT.

If you are self-employed, or a "chargeable person", you pay PRSI on deposit interest in addition to DIRT. If you are self-assessed, it does not strictly mean you are self-employed or chargeable (I filled out self-assessment Form 11's for years but with most income from PAYE, there was no extra tax on deposits). The definition of a chargeable person is here:

[broken link removed]

From my experience, deposit income did not count toward the €3,174 threshold for being chargeable if you were a PAYE worker. However, my understanding (from another person's post on the forum) is that if deposit income above the threshold was your only income, you would be charged PRSI. (I will get to find that out on this year's income).

Everything changes next year, because of changes in Budget 2013 (the one passed in December 2012). Deposit interest earned from 1-Jan-2014 will be subject to PRSI at 4% regardless of your employment status. As far as I know there is still no information about how this will be declared -- will all PAYE workers now have to make a mandatory tax return for the first time?

Hi,
Thanks all for your help, much appreciated. I will request my local tax office to double check everything again. Actually it was on the gross interest earned (i.e. before DIRT was deducted) that the revenue charged PRSI, Tax and USC .

I am a SAHM with no income of my own. My husband is a PAYE worker with no other income.

We have Savings both Joint and Separate.

How will the PRSI be charged ? Will we now have to do a Tax Return ? As I have no income (apart from Interest on Savings) will I have to pay PRSI on the Savings in my own name ? Would we be better off transferring all savings into my name only ?

Greekwife said:

I am a SAHM with no income of my own. My husband is a PAYE worker with no other income.

We have Savings both Joint and Separate.

How will the PRSI be charged ? Will we now have to do a Tax Return ? As I have no income (apart from Interest on Savings) will I have to pay PRSI on the Savings in my own name ? Would we be better off transferring all savings into my name only ?

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Yes, from 2014 you have to pay PRSI in addition to DIRT regardless of your income and tax status (unless you are over 66 and below an income threshold). I don't think Revenue have announced yet how the PRSI is to be collected, so not clear whether you have to do a tax return.

I am getting a loan from my brother and I will be paying him Interest which I will be showing and which he will be declaring. The interest will be €2,000.00 gross for the year. Will he be taxed on this as income or will I be expected to deduct Dirt from it and pass it on directly or is it only financial institutions that are allowed to do this

You should withhold 20% income tax on each payment and remit it to the collector general with your tax return.

You give him a R185 http://www.revenue.ie/en/tax/it/forms/formr185.pdf

And he will pay tax at his marginal rate on the interest.

Thank you Joe 90. I appreciate your help. I should have stated that he is married and his earnings are well below an income where he has to pay the higher income tax rate.