PAYE / non PAYE income less than €5,000 - PRSI

Some time ago PRSI was extended to cover a range of incomes that previously were not subject to PRSI.

Included income is deposit interest and credit union dividends and most forms of income not subject to PAYE - though situations where PAYE must be applied has been extended.

Revenue has helped sow confusion with PAYE taxpayers not being a chargeable person if one's non-paye income is below €5,000. Being a chargeable person means filing a Form 11 which is the long form tax return filed by a minority of tax payers - somewhere between 250,00 to 400,000.

This €5,000 is most certainly not tax free and where DIRT was applied Revenue have used the term 'final liability tax' which means no additional tax to pay. This does not mean its free from PRSI - which it isn't.

There is a liability to PRSI at Class K at 4% on ALL bank interest received and credit union dividends received and it has never been exempted or any lower limit applying.

Revenue have unhelpfully said this about DIRT tax:

DIRT is a final liability tax, meaning that the financial institution deducts the tax before they pay you the interest. You can request a statement from your provider of the amount of DIRT they deducted. It is up to the financial institution to decide if a deposit is subject to DIRT.

In some circumstances, you may also have to pay Pay Related Social Insurance (PRSI) on the interest you received. Universal Social Charge (USC) does not apply to deposit interest.

['may' here effectively only means thos under 16 and over 66 - virtually everybody else is liable]

This is what Citizens Advice say (and is correct):

Can I earn non-PAYE income without having to use self-assessment?​

If you are a PAYE taxpayer and you also have non-PAYE income, you do not have to use self-assessment if that income is:

• Net taxable income of under €5,000 (after losses, capital allowances and other reliefs) and
• Coded in against PAYE tax credits (see below) or fully taxed at source and
• Gross income of less than €30,000

Although you are not a chargeable person for self-assessment, you still have to inform Revenue of this income.

How to make a tax return if you do not have to use self-assessment​

If you have non-PAYE income that you do not have to self-assess, you use Form 12 to declare it. You can:

• Fill out a paper form 12 and send it to Revenue
• Complete the online Form 12 – this electronic form is available through Revenues Myaccount service
• Fill out Form 12 – this is a simplified tax return for PAYE taxpayers

[Note I am of the view that Revenue have contributed to a situation of confusion and the stupid extension of PRSI should have been thought through. Here I am mere;ly laying out the actual position and at this stage with property tax, vacant homes tax, prsi we should be facing up to everyone filing a tax return over a lower limit. This mess means most have not paid the PRSI at class K which they are liable for. In addition Revenue 'rent a room relief' has to be returned - all in all how much PRSI went uncollected as the collection vehicle is essentially Revenue ]

It is not strictly true that all people with unearned income pay class K Prsi.
People under age 66 with an ARF pay class S Prsi on unearned income.
e.g. A person with an ARF yearly drawdown of 3000 euro per year and deposit interest of 2000 euro per year would gain 52 class S Prsi contributions which are reckonable.
People in this category who need extra reckonable paid contributions to increase their contributory pension should ensure that they submit a form 12.

WizardDr said:

This €5,000 is most certainly not tax free and where DIRT was applied Revenue have used the term 'final liability tax' which means no additional tax to pay. This does not mean its free from PRSI - which it isn't.

There is a liability to PRSI at Class K at 4% on ALL bank interest received and credit union dividends received and it has never been exempted or any lower limit applying.

Revenue have unhelpfully said this about DIRT tax:

DIRT is a final liability tax, meaning that the financial institution deducts the tax before they pay you the interest. You can request a statement from your provider of the amount of DIRT they deducted. It is up to the financial institution to decide if a deposit is subject to DIRT.

In some circumstances, you may also have to pay Pay Related Social Insurance (PRSI) on the interest you received. Universal Social Charge (USC) does not apply to deposit interest.

['may' here effectively only means those under 16 and over 66 - virtually everybody else is liable]

Click to expand...

Hi Wizard,

Are you sure about the bit in bold?

I am not familiar with the relevant legislation but the relevant site about PRSI Class K (www.gov.ie/prsik) says the following:

PRSI Class K9 Rates​

Individuals in the following employments will be classed as PRSI Class K9 and will pay the rate in the table below;

• Employees and occupational pensioners with no additional earned self-employed income but who do have unearned income only such as rental income, investment income, dividends and interest on deposits and savings.

Class K9 No upper ceiling​

Unless I am misreading the foregoing, an employee / pensioner with no other self-employed income, who has annual unearned income of less than €5,200 (52 weeks x €100), won't have any liability and can record their unearned income as Class M...?

So in effect, it appears there is a lower limit of €5,200 for a liability under Class K to kick in on unearned income for a person who is otherwise not a chargeable person. Since we already know one has to have non-PAYE income in excess of €5k to be a chargeable person, it seems to follow that liability will only arise in respect of the cohort of people who are already obliged to file a Form 11.

@SClass - I take the point but the liability is still @4%.

@torblednam

The legislation is very complex don't ask me why I had to wade through three different strands of legislation (!) and it does not leap out.

However this is what the Policy unit said: "It is a PRSI levy and Class K is awarded however Class K is not reckonable."

I think this means K1 which has a liability of 4%.

I would only be too delighted if this is wrong but what that would mean is that a range of income (52 x €100) would be exempt and that is not what happened when they introduced this. I think it was poorly executed because in addition there is no lower threshold for reporting bank interest or credit union dividends.

There is also confusion at the under €5,000 amount on non-paye income that allows a person to file a Form 12 instead of Form 11.

The class K Prsi rules are explained better here.
The K9 table shown in #3 is referring to self employment income but lists both employer and employee so it is probably a mistake.