UK guaranteed income bonds

[BlueHorseShoe]

Does anyone know how UK guaranteed income bonds are taxed in Ireland

Guaranteed Income Bonds

Earn guaranteed monthly income for 1 year. Start saving now!

www.nsandi.com

These are essentially Government bonds for retail savers paying monthly interest

Is this due DIRT or income tax ?

Also I was on a higher rate tax code earlier this year before leaving a job but total earnings for this year including savings interest will likely make me a standard rate tax payer as of the end the of 2024

 

[Corola]

Income tax. It's a bond, not a deposit.

 

[BlueHorseShoe]

Income tax. It's a bond, not a deposit.

Ok so do I file every month or at the end of the year ? - I thought I paid DIRT on this so haven't filed anything for 2024 yet since I bought the bonds about 3 months ago - I should clarify I am PAYE taxpayer this year and I used to be a higher rate tax payer but due to leaving job its unlikely I will earn over 42K for the year complete with income bond and all savings interest

 

[Corola]

You use MyAccount on the Revenue website and declare your interest by making a PAYE Income Tax Return (Form 12). You have four years after the end of the year to make a PAYE return so your 2024 interest must be declared between 2025-2028.

 

[BlueHorseShoe]

You use MyAccount on the Revenue website and declare your interest by making a PAYE Income Tax Return (Form 12). You have four years after the end of the year to make a PAYE return so your 2024 interest must be declared between 2025-2028.

This is great news it means I am not late in filing - also its likely I just saved myself tax without realising it - I will not be over 42k so income tax and PRSI is 24% and DIRT is 33%

 

[Corola]

I assume as well that your total unearned income including interest is less than €5,000? If it is higher than that then you would be self-assessed not PAYE.

 

[ClubMan]

This is great news it means I am not late in filing - also its likely I just saved myself tax without realising it - I will not be over 42k so income tax and PRSI is 24% and DIRT is 33%

Do you also have to pay USC?

 

[BlueHorseShoe]

I assume as well that your total unearned income including interest is less than €5,000? If it is higher than that then you would be self-assessed not PAYE.

Yes that assumption is correct - the savings interest will be 2700 and income from income bonds is 1345 - that combined with PAYE (and also jobseekers which they add to the 20% band as well) the total income should be under both the 20% threshold and 5000 - unless I get a really well paying job in the next few weeks - which is still a possibility

Worth noting though if income bonds interest of 1300 is considered income - does it still come under the 5000 threshold ?

Also if I end up classed as higher rate taxpayer by say a few euro - its looks possible you can end up paying higher tax amount on Non-EU deposit interest which includes other UK savings accounts (but not bonds if my understanding is correct) - to my knowledge for income bonds you only pay higher tax on the income you go above 42k on (hopefully) - but if classed as higher tax rate payer for UK savings deposits you pay marginal rate of tax not DIRT

It looks like income from bonds might be reported under the tax form section 41 Other UK Income ? but there is also sections

36 UK Deposit Interest
38 UK 'other' interest
42 Other Foreign Income

so might clarify that with Revenue

 

[ClubMan]

Yes that assumption is correct - the savings interest will be 2700 and income from income bonds is 1345 - that combined with PAYE (and also jobseekers which they add to the 20% band as well) the total income should be under both the 20% threshold and 5000 - unless I get a really well paying job in the next few weeks - which is still a possibility

JB is not considered unearned income.

Worth noting though if income bonds interest of 1300 is considered income - does it still come under the 5000 threshold ?

Your question isn't really clear. You'll probably need to clarify.

Also if I end up classed as higher rate taxpayer by say a few euro - its looks possible you can end up paying higher tax amount on Non-EU deposit interest which includes other UK savings accounts (but not bonds if my understanding is correct) - to my knowledge for income bonds you only pay higher tax on the income you go above 42k on (hopefully) - but if classed as higher tax rate payer for UK savings deposits you pay marginal rate of tax not DIRT

This is also unclear. Are you asking a question here?

It looks like income from bonds might be reported under the tax form section 41 Other UK Income ? but there is also sections

36 UK Deposit Interest
38 UK 'other' interest
42 Other Foreign Income

so might clarify that with Revenue

What tax form are you referring to? Sounds like a self-assessed "Form 11" return which shouldn't be necessary here?

 

[BlueHorseShoe]

JB is not considered unearned income.

Your question isn't really clear. You'll probably need to clarify.

This is also unclear. Are you asking a question here?

What tax form are you referring to? Sounds like a self-assessed "Form 11" return which shouldn't be necessary here?

JB uses your 20% threshold lets say you earn 10K PAYE leave the job and earn 9k jobseekers - 19k of 20% threshold will be used I think

Yes I am asking if UK income bond interest is considered part of the 5000 non-paye income threshold

Yes I am asking a question related to income bond interest taxation and the taxation of UK savings interest as well - if I go say 10 euro over 42k could I pay higher rate of tax on all income bond interest or just the amount that sends me over 42k and also would I pay higher rate of tax on non-EU deposit interest like UK savings accounts interest (apparently you pay the higher of DIRT or higher income tax rate on non-EU deposit savings interest including UK savings account)

Those categories are also on a Form 12

Also how does it work if you pay PRSI on income bond interest and are already paying PRSI as part of jobseekers

 

[Corola]

It looks like income from bonds might be reported under the tax form section 41 Other UK Income ? but there is also sections

36 UK Deposit Interest
38 UK 'other' interest
42 Other Foreign Income

UK 'Other' Interest (i.e. not deposit interest) is a more correct description than Other UK Income. Both are taxed at the marginal rate.

UK Deposit Interest is wrong since it is bond interest not deposit interest.

Other Foreign Income is taxed at marginal rate but this line is for non-UK other foreign income.

Yes I am asking if UK income bond interest is considered part of the 5000 non-paye income threshold

Yes it is included in the €5,000 threshold.

 

[BlueHorseShoe]

I assume as well that your total unearned income including interest is less than €5,000? If it is higher than that then you would be self-assessed not PAYE.

Actually I had another think about this topic

Forgetting about income bonds for now if I earn 2700 from deposit savings accounts which are subject to DIRT presumably this 2700 does not form part of your 42k earnings or consume 20% threshold and is
is it taxed separately under non PAYE therefore you can still be a standard rate taxpayer

To my knowledge Jobseekers does consume 20% threshold

What concerns me is inadvertently going over 42k earnings threshold and paying higher rates of tax on non-EU UK savings accounts interest and or even on income bonds interest

 

[BlueHorseShoe]

UK 'Other' Interest (i.e. not deposit interest) is a more correct description than Other UK Income. Both are taxed at the marginal rate.

UK Deposit Interest is wrong since it is bond interest not deposit interest.

Other Foreign Income is taxed at marginal rate but this line is for non-UK other foreign income.


Yes it is included in the €5,000 threshold.

Your help has been amazing thanks so much for these clarifications

When you say marginal rate do you mean 20% ? If you have enough 20% threshold left for the year ?

 

[Corola]

Your marginal rate is the highest tax band you fall into for your total level of income.

For example if your bond interest pushed you over 42k your marginal rate of income tax is 40% and you would pay 40% on the part above 42k and 20% on the part below.

The same applies to USC which you will also have to pay on this interest.

This interest is exempt from PRSI as a PAYE/Form 12 user.

 

[Corola]

Forgetting about income bonds for now if I earn 2700 from deposit savings accounts which are subject to DIRT presumably this 2700 does not form part of your 42k earnings or consume 20% threshold and is
is it taxed separately under non PAYE therefore you can still be a standard rate taxpayer

Deposit interest being subject to DIRT doesn't count towards the income tax or USC thresholds.

 

[Corola]

Also if I end up classed as higher rate taxpayer by say a few euro - its looks possible you can end up paying higher tax amount on Non-EU deposit interest which includes other UK savings accounts (but not bonds if my understanding is correct) - to my knowledge for income bonds you only pay higher tax on the income you go above 42k on (hopefully) - but if classed as higher tax rate payer for UK savings deposits you pay marginal rate of tax not DIRT

Yes, that's correct. All of your non-EU deposit interest is taxed at the higher of your marginal rate of income tax or DIRT.

 

[BlueHorseShoe]

Deposit interest being subject to DIRT doesn't count towards the income tax or USC thresholds.

Thanks for answering all my questions I really appreciate the time you took

If thats the case I definitely won’t go over 42k

Approx 2700 will be filed just under DIRT and only approx 1300 is income from bonds which added to other annual income from previous job and jobseekers will all be within the 20% threshold

Interesting USC is due and not PRSI either way 4% I believe

Seems like I have inadvertently reduced my tax liability buy buying UK Guaranteed Income bonds which at the time I thought would attract DIRT - this is exactly how I wanted to diversify my non-PAYE income - if I am a standard tax payer at 20% makes more sense to buy income generating bonds than put money into savings - never done this before as I have always been a higher tax payer so Ireland/EU savings with DIRT was slightly better than any more 40% taxed income

I assume Corporate Bonds and EU Government bonds interest are treated the same - income that stacks on 20% to 40% thresholds

 

[Corola]

Seems like I have inadvertently reduced my tax liability buy buying UK Guaranteed Income bonds which at the time I thought would attract DIRT - this is exactly how I wanted to diversify my non-PAYE income

NS&I is the UK equivalent of State Savings in Ireland.

Are Prize Bonds winnings or Ireland State Savings products subject to Tax? | Ireland State Savings

www.statesavings.ie

A "British Savings Bond" is equivalent to a Fixed Term Product mentioned here.

Where it says "Fixed Term Products, Instalment Savings and Prize Bonds winnings are not subject to Deposit Interest Retention Tax (DIRT) and are exempt from Income Tax, Pay Related Social Insurance and Capital Gains Tax in Ireland."

So generally these products are not subject to DIRT but are subject to Income Tax. Except the Irish products are exempt from Income Tax. But the exemption doesn't apply to the UK products so Income Tax does apply, and not DIRT.

 

[Corola]

I assume Corporate Bonds and EU Government bonds interest are treated the same - income that stacks on 20% to 40% thresholds

Yes, subject to Income Tax + USC in the same way. Exempt from PRSI for PAYE taxpayers.

 

[Corola]

For PAYE/Form 12 users:

Tax rate on interest	Ireland	EU	non-EU inc. UK
Deposits	DIRT @ 33%	DIRT @ 33%	max (DIRT, IT @ marginal rate)
State Savings Bonds	Exempt @ 0%	IT + USC @ marginal rate	IT + USC @ marginal rate
Corporate and Govt Bonds	IT + USC @ marginal rate	IT + USC @ marginal rate	IT + USC @ marginal rate