PRSI in the year you hit 66?

Brendan Burgess

Brendan Burgess

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How is PRSI calculated for a director in the year they hit 66?

For example, if they are 66 on 30th June.

Their income from January to June is €20k. Their income from July to December is €40k.

Do they pay €20k @4% = €800 + €40k @0%

or do they pay €60k @4% = €2,400 per year or €1,200 for half a year.

I am told it's the former by a director who is 66 later in the year and is holding back salary and bonuses until after he hits 66.

I thought he might be better waiting until next year to pay zero on it.

I am surprised that I have not seen it as a tax planning point.

Brendan
 
Brendan Burgess said:
How is PRSI calculated for a director in the year they hit 66?

For example, if they are 66 on 30th June.

Their income from January to June is €20k. Their income from July to December is €40k.

Do they pay €20k @4% = €800 + €40k @0%

or do they pay €60k @4% = €2,400 per year or €1,200 for half a year.

I am told it's the former by a director who is 66 later in the year and is holding back salary and bonuses until after he hits 66.

I thought he might be better waiting until next year to pay zero on it.

I am surprised that I have not seen it as a tax planning point.

Brendan
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No prsi payable from the month you turn 66 is my understanding of it. Also the benefits a person gets from paying prsi cease at the same time.
 
One of the main criteria for qualifying for class M (nil) PRSI is that you are of pensionable age, currently 66. Since state pensions are normally only paid from the date that one turns 66, and not from the start of the year in which one turns 66, I would expect that the same applies to class M PRSI. Basically, what @Harvard said. But I can't find anything clearly stating this either.

From the attached guide:
Class M relates to people with a nil contribution liability. For example, persons under age 16, persons of pensionable age (currently 66 or over) including those previously liable for Class S, persons in receipt of occupational pensions or lump-sum termination payments (on that part of the income only), and people within Class K with no contribution liability.
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ClubMan said:
One of the main criteria for qualifying for class M (nil) PRSI is that you are of pensionable age, currently 66. Since state pensions are normally only paid from the date that one turns 66, and not from the start of the year in which one turns 66, I would expect that the same applies to class M PRSI. Basically, what @Harvard said. But I can't find anything clearly stating this either.

From the attached guide:
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Brendan Burgess said:
Thanks Harvard.

Do you have any official reference or link to confirm that? I can't find one.

Brendan
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The only official document I have come across is what @ClubMan has posted. This was after multiple calls to revenue and social protection in relation to a gentleman turning 66 recently. You will see in the document that they are multiple classes covering this age group. In this case I would say none of them matched his circumstances perfectly it was a question of getting the best fit.
 
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It’s a really interesting query. My recollection is very vague, but I remember seeing something around 20 years ago where (I think) someone paid no PRSI on anything for the full year in which they turned 66. e.g. dividends etc. I suppose if you look at it another way, if it wasn’t for the full year and was only from the person’s birthday, you’d constantly hear of people saying “pay me that rent/dividend next week/month after my birthday”, yet you don’t.
 
I was not working in the year I turned 66, but I had some investment income (rental income, dividends and interest) but was not charged any PRSI at all
 
Under the paye system in the calender year of your 66 birthday.
You will pay prsi for monthly earnings before the month of your birthday.
You do not pay prsi for monthly earnings for the month of your birthday.
I don't know how Prsi is applied for weekly earnings.
 
jpd said:
I was not working in the year I turned 66, but I had some investment income (rental income, dividends and interest) but was not charged any PRSI at all
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Interesting.

So let's say you had €40k income distributed evenly throughout the year.

When you did your return on ROS and entered your date of birth, they applied no PRSI at all to your income?



Brendan
 
Brendan Burgess said:
Interesting.

So let's say you had €40k income distributed evenly throughout the year.

When you did your return on ROS and entered your date of birth, they applied no PRSI at all to your income?



Brendan
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That is my recollection of the example I saw, albeit it was a long time ago.
 
Correct, Brendan - no PRSI at all.
There are only annual totals of income on Form 11, so it would be unfair to prorata them as the could arrive at any time throughout the year
 
Brendan Burgess said:
Do you have any link to an official source saying this?
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I do not have any publication I can link to. However....

I ran a dummy Form 11 on ROS Offline for the tax year 2021 with the following inputs:
- Date of birth: 30th June
- Income: €80,000 of rental income

If a year of birth of 1956 is entered in the 'Personal Details' section (making the taxpayer 65 in the tax year 2021), ROS calculates a PRSI liability of 4% on the income (€3,200).

If the year of birth is amended to 1955, no PRSI liability is calculated by ROS.

I'm sure a call to the Department of Social Protection - PRSI division would have the situation clarified very easily.
 
Right Winger said:
Hmmm,
I wonder what would happen if you needed those PRSI credits to qualify for, or enhance, your OAP?
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My guess is you can't have it both ways.

I've also heard of social protection under counting people's contributions in the years they have moved from one job to the next where there was a gap of a few weeks. In this case it related to records in the early 80's and the person was able to pull documents proving that he was higher in credit.
 
Seems like the jury is split on class M for the full year of one's 66th birthday versus from one's 66th birthday onwards only? And no authoritative clarification available?
 
Right Winger said:
Hmmm,
I wonder what would happen if you needed those PRSI credits to qualify for, or enhance, your OAP?
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If a person has not paid prsi for the year of their 66th birthday they could pay voluntary Prsi for that year if they needed extra contributions
 
"... benefits a person gets from paying prsi cease at the same time."

So, for example, dental and optical benefits cease from 66th birthday ? I presume it is then necessary to apply for a means-tested medical card to get that type of cover back?
 
From "Operational guidelines for treatment benefits"


Qualified at 60 and over – if people qualify for benefit at age 60-65, they keep that entitlement for life.
 
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