Tax Liability for Retired over 65's

Income Tax for over 65’s

I am retired and was 65 in 2005.

I have a civil service pension of €31594 p/a.

My wife took early redundancy in 1989 and does not work outside the home. She has a pension of €3432 p/a

We have no other income.

I have been trying to work out my tax liability for 2006 but I am confused as to how the age allowance for the over 65’s will work. I would welcome any thoughts from askaboutmoney readers.

Thanks.

Pat

Have you tried [broken link removed] to see what figures/calculations it comes up with?

I have just tried Karl's tax calculator for 2005 and 2006.

Karl's 2005 figure shows me owing €856 tax. Up to the present - with two more payments to come I have already paid €1072. At that rate I should pay €1182 by 31 Dec.

I really hoped that someone could explain to me how Revenue calculate the tax credits applicable in my case and how they arrived at the figures they did..

My TFA allowances for 2005 show the following:
Column 1
Age Exemption Credit 6600
Allocated to other employments: 1270
Tax Credit this employment 5330

Column 2
Standard Rate Band: 33000
Allocated to other emp 3400 (I assume for wife's pension)
Cut off point this employment: 29600

I do not fully understand the 1270 allocated to other employments. I thought my wife's pension was well below any income on which she would have to pay tax.

Any explanation would be appreciated.

Frager said:

I do not fully understand the 1270 allocated to other employments. I thought my wife's pension was well below any income on which she would have to pay tax.

Click to expand...

The 1270 is the PAYE tax credit. This is not transferable between spouses, so if she doesn't get enough to use the credit it is lost.

My understanding is that the exemption limit applies from your 65th birthday or if your 65 during the tax year. So the exemption limit in your case applies from 2005. As your income is less than the exemption for 2005 of 33,000 you are not liable for tax. Contact the tax office and advise them. You may have to wait until you get your P60 next year and apply for a refund then.
Are you also entitled to an old age pension/ retirement pension. This is also taxable. You are entitled to claim marginal relief. Let me know and I'll try to calculate the tax due (if any)

For 2006 you will not have any liability but you may have a liability if you are paid a pension.

Are civil servants entitled to a state pension? Maybe not.

Thanks for your offer to calculate my tax due for 2006. The relevant figures are given at the end.
Apologies if this is long winded.

I did have a number of discussions with the revenue at my local tax office and after three visits I thought we had things sorted.

I have a number of questions about my TFA.

1. My age exemption credit for 2005 is 6600. Where did this figure come from? Is it in any table?

2. They subtracted 1270 (allocated to other employments) from this. Because my wife and I are no longer working are we entitled to a PAYE allowance? Is the 1270 included in the 6600?

3. What income can my wife have before she has to pay tax?

My refuse bin payment for 2004 was €260.

For 2005 my pension will be €31,042
My wife’s pension will be €3046.

My tax will be €1,196.
Does this seem correct?

Below are the 2006 figures based on the pension payments we got today:

Self: €32,010; Wife: €3428.
Refuse Charges paid: €320.
We have no other income.

1. My age exemption credit for 2005 is 6600. Where did this figure come from? Is it in any table?

Click to expand...

This is calculated as 33,000 @20%

2. They subtracted 1270 (allocated to other employments) from this. Because my wife and I are no longer working are we entitled to a PAYE allowance? Is the 1270 included in the 6600?

Click to expand...

As the 33,000 is a married allowance, the revenue is deducting the amount amount allocated to your wife's pension this 1270 is not transferable.

3. What income can my wife have before she has to pay tax?

Click to expand...

I calculate it as 6,350 (6350 @ 20% = 1270)

This is my understanding of the situation and stand corrected
I calculate your tax bill as 826 (including deduction for bin charges) for 2005.
You may also be able to claim marginal relief. Not included in the above calculation. Not sure how to calculate it in your case.

Marginal relief applies where your income does not greatly exceed the relevant exemption limit i.e. where your income is below twice the exemption limit. (Don't know what the exemption limit is in your case as your wife is under 65 and on a pension). Give revenue a call they will know how to apply this.
Marginal relief works by resticting the tax payable to a max of 40% of the amount by which your income exceeds the exemption limit.

Bit of a mouthful I know especially if you are new to this sort of thing but I don't know if the exemption limit in your case for 2005 is 33,000 or 31,730 (33,000 - 1,270)

Your wife has no liability to tax for 2005.

Ask revenue about bin charges.

You say you have no other income. Is your civil servise pension inclusive of the state pension (Retirement pension/old age pension)

Hope this makes sense. A fairly complicated area to understand.

Thanks for the time and your clear explanation regarding my tax.

Strictly speaking the pension I have is a retirement pension. I worked for over 40 years and retired on full pension.

I do not qualify -- as far as I know -- for an old age pension.

I do not qualify -- as far as I know -- for an old age pension.

Click to expand...

I though that everyone was entitled to an old age pension, Civil servants maybe an exception to the reduced PRSI they pay.
Check this out.
The pension scheme may deduct the state pension from you. But you still have to collect the state pension yourself.

I paid PRSI at the D rate and I have pasted the Class D Benefits from the Department of Social Welfare Web site. According to this I am not entitled to an old age pension.CLASS D BENEFITS

• Widow's or Widower's (Contributory) Pension
• Orphan's (Contributory) Allowance
• Occupational Injuries Benefits
• Bereavement Grant
• Carer's Benefit