How do I treat interest accruing on Fixed Term accounts in my tax return?

[gledswood]

I closed some State Savings accounts last year and transferred the funds in to a Fixed Term deposit account with both AIB and Permanent TSB.

I believe that interest is credited to the accounts at the end of the term?

On my tax return I am asked to declare the interest received. I have received nil interest although it may be accruing on the account.

How do I declare the interest on these accounts if I have not received it, each year?

When the interest is eventually credited, does this add to my income tally for that one year. This will boost my income for that one year and will I be taxed accordingly? Seems unfair that I cannot utilise my tax credits each year against accruing interest.

Do I pay both DIRT tax and increased income tax on the deposit interest received in the year that it is credited as a result?

 

[Gordon Gekko]

You do nothing until it’s paid and then you include it for disclosure purposes but the DIRT at source is the beginning and end of your liability.

 

[gledswood]

but the DIRT at source is the beginning and end of your liability.

Thank You. For some reason I always thought that the interest left after DIRT was to be included as income and subject to tax.

 

[TrundleAlong]

I have noticed a question on my tax return where I am asked for the number of deposits accounts that I have. Why am I asked this......many don't even pay interest.

Also, if DIRT tax is my only liability and as this is deducted at source, why do the revenue need to know how many deposits that I have and the amount of interest received?

 

[Persius]

Are you doing your tax return on form 11?
In that case, even though the DIRT is already deducted at source, you still have to declare the deposit interest you received (before the deduction of DIRT). Then you will be charged 4% PRSI on that (assuming you don't have a PRSI exemption). If you're not filing form 11, but using something in "my account" (I think it might be form 12), then there shouldn't be any PRSI due. It hasn't been an issue for most people for many years as Irish deposit rates were essentially 0%. But now it is.

Note, the above is for Irish bank interest. I thought state savings interest was exempt from DIRT, and you didn't need to declare it in Form 11.

 

[Laramie]

Then you will be charged 4% PRSI on that

So PRSI is charged on top of DIRT......no matter what?

 

[Persius]

So PRSI is charged on top of DIRT......no matter what?

That's my experience from filling in Form 11 on ROS. AFAIR I first used this for the tax year 2011, when you could still get decent deposit interest from the likes of Rabo and Northern Rock. I had to file form 11 in that year as I had opened a foreign bank account. From my recollection, when ROS does the automatic calculation of your tax return, you can see 4% PRSI applied to any EU deposit interest (which I also had to pay DIRT on) and Irish deposit interest (from which DIRT was deducted at source). But I can't find any old returns to confirm it. The oldest records in ROS are from 2019, and I had no Irish deposit interest at that stage. But I can see the 4% PRSI applied to my EU deposit interest.

If you're not using Form 11, then you won't have to declare Irish deposit interest, so you won't be charged PRSI on it.