Is it better to be assessed for tax separately?

Q&A:I am in receipt of a private sector occupational annual pension of €50,000 and my wife receives an annual salary €45,000 from the public service. Both are PAYE. Apart from some small savings, we have no other income/assets/liabilities. We own our home.

Both of us are assessed separately for tax purposes as we didn’t see any reason or benefit to be jointly assessed. However, Fiona Reddan’s (excellent) article in Your Money last week suggested, and I quote – “ensure, to the maximum extent possible, that your jointly assessed for tax reasons, etc . . .”

Based on the information above, can you give your opinion in the matter of sole or joint assessment in our case?

Mr A.A., Dublin

The advice came not from Fiona herself but from accountant Tommy McGibney, one of the people to whom she spoke. And, in general, it’s sensible advice – especially for people in situations he outlined, where there income can be volatile.

However, there is no requirement to do so and, in your case, I cannot see any way in which it would change your situation or tax bill. You are each well above your respective income exemption thresholds and your income is stable. There is no likelihood that either of you will suffer a decline in income such that one or the other would not maximise the tax credits on offer.

Once married your wife loses out on benefit

My wife and I intend to purchase a family home this year. My wife is a first time buyer. I own a property. I lived in my property as an owner occupier for three years (claiming three years of mortgage interest relief as an owner occupier), and have now rented it out for a further three years.

All necessary regulations are complied with in relation to de-registering from mortgage interest relief, paying the NPPR and Household Charge and filing tax returns for it as a rental property.

Under the new Property Tax, second-hand property purchased by a first-time buyer in 2013 will be exempt until the end of 2016. If my wife and I jointly purchase a property before December 31st, 2013, will we be entitled to full exemption or half only?

Mr J.R., Kilkenny

Neither, unfortunately. The rule governing first-time buyers is that you can only go that route once. And, as a couple, given that you have previously acquired a property as a first-time buyer, neither of you will qualify.

It does seem harsh. Essentially, if your wife had not yet married and acquired the property in her own name, she would qualify for the full benefit; as she is married, your previous history enters the equation.

And there are no half measures. The fact that you have abided by all relevant rules and essentially only benefited from your first-time status for three years was your choice in the Revenue’s eyes.

Welfare payments exempt from tax

I was surprised when a recent correspondent seemed to think that State Pension (received from Department of Social Protection) is subject to USC at 7 per cent. I think this is incorrect. There is no USC on any DSP payments.

Maybe you have dealt with this already and I’ve missed it.

Mr J.C., Dublin

All welfare payments, including the State pension and maternity benefit are exempt from the Universal Social Charge.

As a general rule all payments from the Department of Social Protection tend to be exempt from tax in themselves. However, if, having taken into account, income from other sources, your welfare payment brings you above the relevant income exemption limit, you will have to pay income tax.

This cropped up recently in the case of recipients of the State pension who were also in receipt of an occupational pension or other income. As no tax is deducted at source by the Department of Social Protection, these people were largely unaware that they might owe tax over and above anything deducted at source by their occupational pension provider.

As they all now know, to their cost, people in this situation are obliged to file an annual return and pay any additional income tax due on the State pension income top-up. But at least they won’t have to worry about the universal social charge – at 7 per cent or any other rate.

* This column is a reader service and is not intended to replace professional advice. Please send your questions to QA, c/o Dominic Coyle, The Irish Times, 24-28 Tara Street, Dublin 2, or to dcoyle@irishtimes.com.