DSP Pension Tax credits and rate band adjustment

thefuture2011

I am trying to understand my mothers tax credits for 2011
Her tax rate band has been reduced for DSP pension, which I assume is her widows pension
But her tax credits have also been reduced by DSP pension - can anyone advise me of why this is so

thanks

laughter189

Had a similar problem with my in-laws recently - both married pensioners .

They both had private pensions and the SW pension .

I looked at their total yearly earnings and discovered that their best option was to claim the tax exemption .

By claiming this exemption , it took them out of the tax net completely .

I would suggest that you do a similar check on your relation , - the exemption limits are here :

http://www.revenue.ie/en/tax/it/leaflets/it1.html#section2

JoeTurner

thefuture2011 wrote: »

I am trying to understand my mothers tax credits for 2011
Her tax rate band has been reduced for DSP pension, which I assume is her widows pension
But her tax credits have also been reduced by DSP pension - can anyone advise me of why this is so

thanks

The widow's pension is classed as a taxable income so the Revenue reduce the person's tax credits and cut off point to effectively collect the tax payable on the income.

The standard weekly pension is €193.50 according to citizensinformation.ie. That would give a taxable income for the year of €10,062 - the tax payable on that at 20% would be €2,012. In order to collect this, they reduce the tax credits by €2,012 and the cut off point by €10,062.

Hope that helps - send me a pm if you want more details on your particular case

TRANDS

In a particular case can Revenue take more than 20% of DSP pension?

Is that possible, if the taxed person reaches the higher tax at 41%?

relax carry on

TRANDS wrote: »

In a particular case can Revenue take more than 20% of DSP pension?

Is that possible, if the taxed person reaches the higher tax at 41%?

It's taxable income so if the taxable persons combined income from the DSP and other sources breaches the standard rate cut of point assigned to that person then the portion of income above the standard rate band is taxed at the higher rate.

allthedoyles

TRANDS wrote: »

In a particular case can Revenue take more than 20% of DSP pension?

Is that possible, if the taxed person reaches the higher tax at 41%?

Is this taxed person over 65 ?

TRANDS

Thanks for your interest.

Yes the person is over 65.

allthedoyles

TRANDS wrote: »

In a particular case can Revenue take more than 20% of DSP pension?

Is that possible, if the taxed person reaches the higher tax at 41%?

If a persons earnings reach the higher tax , then of course they pay tax at higher rate .

Reason I ask if this person is over 65 , is because of a tax treatment called exemption limits , which are as follows for over 65's :

Personal Circumstances 2013

Single, Widowed or a Surviving Civil Partner 65 years of age or over €18,000

Married or in a Civil Partnership 65 years of age or over €36,000

Marginal Relief Tax Rate* 40%*

TRANDS

Thanks, that was helpful.