Q&A Dominic Coyle

Getting to grips with PRSI on unearned income


I read with interest your information on PRSI liabilities and declaring it in self assessment where the value exceeded €3,147.

If the savings are in joint accounts, can we treat the income as half for one and half for the other allowing both to stay below the threshold?

Ms A.O’D., email

The general rule with joint accounts is that the savings are deemed to be split evenly between the signatories – whether they be two or more.

For instance, in the case of the deposit protection guarantee, which protects savings up to a maximum of €100,000 in any one institution, a joint account has protection for that amount times the number of named accountholders. Thus in your case, it would be double – i.e. €200,000.

In the same way, I understand the interest accruing on your account will be divided evenly between the two of you as joint accountholders.

Only if that brings either of you above the €3,174 threshold will the 4 per cent PRSI charge apply – but do remember that the €3,174 threshold is cumulative and also includes any other “unearned income” such as dividends from shares and/or rental income.

What form? When? How? on PRSI

I have great confusion over how this PRSI on savings works. What form to use? Do I need an accountant? Do I do it from January 2015 for 2014 or does the Revenue go back years? I am a PAYE earner, how do I calculate it?

Mr P.L., email

It’s evident you are more than slightly stressed about it and that’s not entirely surprising. The vast bulk of PAYE taxpayers have, until now, never really had to worry about filing tax returns. Unless you owned property that you were renting out, or something similar, tax returns really weren’t an issue.

The good news is that, for most people, nothing has changed.

It is very likely that you will still not need to file tax returns. Also, if you are over 66 years of age, you are not liable to PRSI.

First things first, as for the reader above, if you are under 66 and you add together ALL your unearned income – bank interest, stock dividends and rental income, if any – does it come to more than €3,174 in a year?

If not, you are not affected by the new rules on PRSI, you do not have to fill in any forms and you can rest easy. You can stop reading here.

If your annual “unearned income” is above the €3,174 threshold, then you will be affected by the new rules. So what does this mean?

First you will have to file a tax return under the self-assessment (or Pay and File) procedure. This is exactly what every self employed person does. It is intimidating only because of its unfamiliarity, and because of the number of questions on the form.

The good news is that you are unlikely to need to bother about most of them and the Revenue provides detailed notes outlining what goes where and why.

What form? Form 11 is the form in question. It is the annual return of income and is available from any Revenue office or online.

Do you need an accountant? If you are a PAYE taxpayer with fairly uncomplicated unearned income, there should be no need for an accountant.

If you would be more comfortable with one, there is nothing to preclude you approaching one, though it is unclear whether the cost could be set against any liability.

Most importantly, I guess, is when this new regime kicks in. The relevant date is January 1st, 2014. This means, for your purposes, the 2014 tax year.

What happens under self assessment is that you are supposed to pay preliminary tax to the Revenue before October 31st each year. This is your best estimate of the tax you are likely to owe.

Once the tax year ends, you must file a tax return (Form 11) for that year – i.e. you file in 2015 for the 2014 tax year.

However, this must be done before October 31st of the following tax year (you get slightly longer if you file online using Revenue’s ROS system).

It is important to note, however, that the Government and Revenue are looking to bring back this date under the new budgetary arrangements. Nothing has been firmed up as yet but you will need to keep an eye on it.

If you owe anything over and above the preliminary tax estimate that you paid in October 31st of the relevant tax year (i.e. 2014 in this case), it must be paid on or before October 31st the following year (2015 in this case).

You have no liability to PRSI for any “unearned income” that you received before the end of this year, the measure kicks in only on income earned after January 1st next – although clearly income tax would have applied to rental income and dividends up to now, and DIRT has always applied to deposit interest.

Such other taxes remain in place and while DIRT is deducted at source by your bank, you will have been expected to file a return for the other forms on unearned income named above.

Calculating it is easy. You tot up the gross “unearned income” – i.e. bank interest BEFORE Dirt, stock dividends BEFORE withholding tax and rental income before any deductions, including income tax. If this figure exceeds €3,174, you take 4 per cent of it – multiply the income by 0.04 – and that is your PRSI bill.

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 dcoyle@irishtimes.com