I wonder if some NTMA products will be treated differently than other eg maybe PRSI would be payable on the solidarity bond yearly interest but not on the bonus or on the interest from savings certs/bonds.
Noonan: The National Solidarity Bonds consist of two elements. On maturity, the bonds attract a lump sum payment that does not form part of income as estimated in accordance with the Tax Acts and is, therefore, exempt from income tax and universal social charge and from the charge of PRSI.
Annually, a payment of interest is made to the bondholder and deposit interest retention tax (DIRT) is deducted. Interest, which is liable to DIRT, is specifically excluded from the charge to universal social charge. However, PRSI may be chargeable on such interest depending on the circumstances of an individual.
state savings ten year solidarity bonds now despite the fact they are the best savings product at the moment. True, ten years is a long time and early withdrawals bite severely into the interest (plus PRSI), still, if left for the full term, equates to over 5%
Gross AER on the 10 year SB is indeed 3.05%. Based on current rates, no PRSI and 33% DIRT, net AER is 2.79%...however I wonder where the 5% interest come from. Looking at the statesavings.ie (as a new user I can't post urls) website, a gross AER of 3.05% is listed. Did it just decrease is all or am I looking at the wrong information? Thanks!
Another subtle change ...
Change in liability for PRSI (Section 3)
From 1 January 2014, the exemption from PRSI applying to employed contributors and occupational pensioners under 66 years, whose only additional income is unearned income, will be abolished. This means that unearned income such as rental income, investment income, dividends and interest on deposits and savings will be liable to PRSI at 4% for the above people provided the person is a ‘chargeable person’ in accordance with the Revenue definition. This will apply to people with unearned income in excess of €3,174. It will not apply to PAYE taxpayers with no other income, or additional income less than €3,174. In addition, people who have reached State pension age of 66 are not liable to pay PRSI, and therefore will not be affected.
“This measure, in addition to the PRSI changes that I implemented last year, will ensure the stability of the Social Insurance Fund so that it can continue to pay the pensions and benefits required by those who need them. It is important to note that this measure will not affect those who have already reached pension age and who are therefore exempt from PRSI,” Minister Burton said.
PAYE workers have always had to file a return if they have non-PAYE income.
A low percent will know how to do this.
Deduction at source @4%, with an electable claim back option, would yield a much higher return for the government.
If indeed the €3174 is the limit below which Prsi will not be payable, how would the bank know the depositor's income? So it can't be taken at source by the bank.
As far as i know the decision not to deduct at source was made and the €3174 rule is actually a tool to ensure that huge numbers of people do not make tax returns. At the moment, earn €3175 and you'll pay PRSI on the lot, earn €3173 and no PRSI is due. If the decision was made to deduct at source this rule could be removed.
Clarity is needed in both in terms of the obligation to make a tax return and the obligation to pay PRSI. Let's say someone has an An Post savings cert which accrues 4000 per year and a deposit account which pays 1000 gross per year. First question would be as already posed by BeyonddePale, how are multi year products treated.
d) 5000 minus 3174