Marginal Relief

Boomtownrat81

Good morning,

I hope I can get clarification on a few matters relating to the above.

I have been looking at my parents P21 Balancing Statements for the past two tax years (2010 & 2011). Both are retired and in receipt of occupational pension from State Bodies.

Under the normal Joint Assessment system they have had Net Tax Payable in the region of €4k - €5k in both years.
Their Income falls in the threshold of €36k to €72k so meet the criteria for Marginal Relief. I have worked out their net tax under Marginal Relief by taxing the surplus of income over €36k at 40% and giving them tax credits of €36k @ 20%. Is this correct?

Under Marginal relief they appear to have net tax payable in the €1k to €2k region for both years.
Can they now contact revenue and seek to be reassessed for both years utilising the Marginal Relief method? Shouldn't they be entitled to a refund?

Thanks and all help appreciated as I am not too familiar with current practice (been working in Industry last five years)

maddogcollins

Have you included USC, as occupational pensions are liable to this. The rates differ depending on age (over/under 70).

Marginal rate is 41% and if you include USC you will be adding up to 7% more, which doing a quick calculation on €72,000 could give you an additional €4,000 or more of a liability. If over 70 it would be at least €2,000 more.

Boomtownrat81

maddogcollins wrote: »

Have you included USC, as occupational pensions are liable to this. The rates differ depending on age (over/under 70).

Marginal rate is 41% and if you include USC you will be adding up to 7% more, which doing a quick calculation on €72,000 could give you an additional €4,000 or more of a liability. If over 70 it would be at least €2,000 more.

USC is calculated on a different basis and isn't included on a P21 Balancing Statement. I am talking solely about PAYE.
Marginal Relief Rate is 40%, 41% is the higher tax bracket under the normal assessment basis.

Alan Shore

Marginal relief works by restricting the amount of tax payable to 40% of the excess. Depending on the gross income the relief is different. 60k x 20% = 12k - 6600 - 490 = 4910. Marginal relief does not apply.

cloonton

OP, You know that with marginal relief for older people there may be some tax relief above €36k, but before too long they would be better off paying tax under the "normal" PAYE system. TBH, if they have the older persons tax credit listed on their P21, then marginal relief would have been applied if applicable. I've frequently seen cases where marginal relief is not the most beneficial way to tax older people where their income is high enough, but haven't yet come across a case where the tax office 'knew' they were an older couple and didn't apply marginal relief correctly. Just my 2 cents!