Q&A: Dominic Coyle
Eating into penisoners’ income
We are aged 78 and 82 with a total pension of €47,000 per year made up of a private pension and the old age pension. We cannot work out what exactly we have lost over the past few years – i.e. ESB, phone allowance etc. Not that it will make any difference in the long run (we’re blessed to have those pensions, particularly as my husband is not in good health) but just out of curiosity, we would like to know.
Ms W.B., Dublin
The main change of people in your position has been the reduction in the value of the household benefits package. This has been reduced twice in recent years to the best of my knowledge.
The package payable to people over the age of 70, and certain others, comprises three benefits – free TV licence, a phone allowance and an electricity/gas allowance.
Back in September 2011, the phone allowance was cut from €21.41 plus VAT to €18.36 plus VAT. This year it has been cut further, to €9.50 a month. Effectively, your payment has fallen from €25.90 a month to €9.50.
The energy allowance, covering either electricity or gas, was changed to a flat rate of €35 a month this year – or €420 a year. Back in 2011, it was also curtailed. The gas allowance fell then from a maximum of €489 a year to €393. Electricity was messier. They used to pay the standing charge plus the public service organisation levy alongside 2,400 units of electricity a year – a figure that fell to 1,800 a year in 2011.
There has been no change to the free TV licence.
That aside, you will also have been affected by a reduction in the income tax exemption threshold for people over the age of 65 which was reduced in 2010 from €30,000 for an individual and €40,000 for a couple to €18,000 for an individual and €36,000 for a couple – effectively bringing your income into the tax net earlier.
Finally, as far as I can see, you will also be worse off following the introduction of the Universal Social Charge in January 2011. It replaced the health contribution and the income levy.
However, over the age of 70, you would not have paid the health contribution and the income levy did not apply to pensioners whose income was below €40,000 annually for a couple (€20,000 for an individual) – and you did not include the state pension in assessing this level of income.
Under the USC, unless your income is below €10,036, you will pay some charge regardless of age.
For anyone with income over that threshold, you’re paying 2 per cent on the first €10,036 (not including the state pension) and 4 per cent on anything over that.
There is a higher rate but that applies only to pensioners with income above €60,000, which does not apply to you.
Tax dividends on shares
listed in UK
I have noted that in recent years a number of Irish registered companies such as DCC and United Drug have moved their listings to London. As far as I am aware the dividends of these companies which were previously paid in euro will now also be available in sterling.
Would it make any difference from an income tax point of view whether one chooses to receive the dividends in sterling rather than in euro? Would the same income tax arrangements apply to the dividends of English registered companies?
Mr J.M., email
There’s a growing trend for Irish companies to relocate their listing to the UK, mostly in search of greater liquidity in the shares. Ireland is, after all, a very small market and for companies like United Drug, DCC and others, such as Greencore, which conduct an increasing share of their business abroad.
As you say, being London-based, dividends would, as a default, be paid in sterling. However, Irish companies – and others, such as Vodafone, which have a large number of Irish shareholders – do offer the alternative to Irish-based shareholders of receiving their dividend in euro. However, as with Greencore, it is possible that they will only pay a sterling dividend into a sterling bank account.
On the tax front, it makes no difference to the situation prior to the companies’ relocating of their stock listing. As an Irish resident taxpayer, the companies will “withhold” dividend withholding tax at the standard rate of 20 per cent.
If you are a higher rate taxpayer, you will be liable for the balance in your annual tax return. Essentially the rule for Irish resident taxpayers is that they are liable for tax in Ireland on their worldwide income.
The same tax arrangements would apply to dividends of UK registered companies.
This column is a reader service and is not intended to replace professional advice. Please send your questions to Q&A, c/o Dominic Coyle, The Irish Times, 24-28 Tara Street, Dublin 2, or to email@example.com