Q&A: Dominic Coyle answers a selection of readers' financial queries.
I am in my 70s and returned to live in Ireland last year after a lifetime of work in the UK. I badly need an "idiot's guide" to how I would be taxed here instead of by the Inland Revenue in the UK. There seems to be no great concern if I were younger, still in work here and the tax collected from my wages. However, this does not apply as all my retirement income comes from UK pensions and I have no income arising from Ireland. I cannot tell if there are special provisions arising relative to the double taxation agreement - all my pensions arise from my work as a civil servant in the UK.
My wife is of a similar age and paid no tax as she had income under the allowance.
There is concern that our UK savings, which are predominantly invested in long-term building society bonds (taxed at 20 per cent), would be required to be closed down if we are to be taxed by the Revenue here.
With so many uncertainties, what is our best and legal route to peace of mind?
Mr D.O'D., Roscommon
The trouble with tax is that you generally need more than an "idiot's guide". Essentially, everyone's position is slightly different and rarely falls conveniently into the tidy format of a formulaic approach.
However, there are a few things you do need to know and act on fairly quickly. Jim Kelly, director of taxation at accountants Grant Thornton, says that you are liable to tax in Ireland rather than Britain, notwithstanding the fact that your income derives from British civil service pensions.
Given that you have already been here some time, you would need to regularise your position quickly or you could face penalties. That really involves talking to an accountant. You could always go to the Revenue but it is clearly an interested party in this issue and independent advice would be preferable, even if it will cost you a little.
Mr Kelly also points out that the situation in relation to your wife is likely to be different between Britain and here. While she may be entitled to certain payments in her own right in the UK, in Ireland her entitlement to non-contributory benefits would depend on the total income coming into the house - yours and hers - and your combined savings.
Mind you, the default position in Ireland - where spouses are assessed jointly, unless specifically choosing otherwise - means that you could claim her tax allowances against your pension income, thus reducing your exposure to income tax.
A final point relates to the savings. It is impossible to say (on the information provided) exactly how they would be affected.
However, Mr Kelly points out that a number of UK tax-efficient savings schemes have no status in Ireland and so would be treated differently for tax. Again, this would best be checked out with an accountant, ideally one with some expertise in dealing with cross-border issues such as yours.
Tax calculation
If I declare €16,000 to the taxman, how is that computed? What would he do to get the tax on that money? And what is the threshold for not having to pay tax? Are there two rates of tax?
M.B., Cork
I'm assuming you are declaring income of €16,000 rather that a tax liability of €16,000 and also that you are talking about current income rather than liabilities relating to historic income.
As you will have seen from this week's newspapers, there can be quite onerous penalties for late payment of tax, especially if the Revenue gets to you before you have had a chance to voluntarily disclose your liability.
How this income is taxed will depend on any other income you might have. For instance, if this is income earned in a self-employed capacity and you already pay tax (PAYE) at source on income earned in employment, then the rate of tax will be determined by your overall income.
Essentially, what happens is that you will notify the Revenue of this and any other income in a tax return. Tax returns are due annually in respect of any income outside PAYE income - which is already taxed before you get it.
How is it computed? Well, in the first place, there is an exemption limit. For a single person under 65 years of age, this is currently €5,210. For people over the age of 65, it is €16,500. Married couples have double that exemption limit. If your income falls within the exemption limit, you pay no income tax.
Apart from that, there are indeed two rates of tax. A single person with no dependent children pays tax at 20 per cent on the first €29,400 of eligible income and at 42 per cent on any income above that figure.
Single people with dependent children remain within the 20 per cent band for income up to €33,400.
For married couples, the 20 per cent limit where there is one income is €38,400; where there are two incomes it is €58,800.
This should all be explained on the tax return which you can pick up from any tax office and also from larger post offices.
You may also be eligible for a range of tax credits and allowances, depending on your circumstances.
What does the taxman do to get the tax he is owed? In the first instance, nothing. The onus to pay any tax due to the Revenue is on you, the taxpayer.
However, if you fail to pay, the Revenue can come after you, including taking court action to retrieve the money it is owed, together with any penalties and interest that may be due.
Cash translation
What would be the equivalent of £700 in 1998 today?
C.M., e-mail
If you were looking purely in terms of coversion to the euro, your £700 back in 1998 would translate as €888.82 in today's money.
However, inflation will have had an effect on the sum. Even in today's fairly low inflation rate environment, you would be surprised how pronounced an impact this can have. The Central Bank tells me that, allowing for this factor, your £700 would now be worth €1,118.50.
Please send your queries to Dominic Coyle, Q&A, The Irish Times, D'Olier Street, Dublin 2 or e-mail to dcoyle@irish-times.ie. This column is a reader service and is not intended to replace professional advice. Due to the volume of mail, there may be a delay in answering queries. All suitable queries will be answered through the columns of the newspaper. No personal correspondence will be entered into.
