Have you investment or deposit income? Watch out for some key tax changes this year that may affect you.

Changes to Deposit Interest Retention tax (DIRT)

Most interest you receive on savings with banks, building societies and post offices is subject to a tax called Deposit Interest Retention Tax (DIRT). Effective from 1 January 2014, the rate of DIRT withheld on your deposit income will increase from 33% in 2013 to 41% in 2014. This change also affects life assurance policies and investment funds.

Can I apply for an exemption or refund of DIRT?

There are a number of limited situations where your deposit interest can be paid without the deduction of DIRT. In summary, the main ones are as follows:

If you are over 65 and your income is less than €18,000 if you are single or €36,000 for married couples;
Charities;
People not resident for tax;
Permanently incapacitated from maintaining yourself and you meet certain other criteria.

It is important to note that, if you qualify you must apply for the exemption, as the financial institution will not automatically apply it without the necessary Revenue approval.

Are there any accounts that are not liable to DIRT?

If you do not qualify for the exemption, there are a number of providers that offer tax free accounts. These are generally limited to State savings operated through the Post Office and certain share accounts operated by the Credit Unions. It is important, however, to compare the net return on your savings taking taxes into account.

    2. Changes to PRSI on investment income

Prior to 2014, employees who only had investment income were not liable to PRSI. This has now changed. If your have what is called ‘unearned income‘ e.g. rental and deposit interest dividends etc that exceeds €3,174 in any one year, you will be liable to an additional PRSI charge of 4%.

Will I be entitled to any Social Welfare benefits for this PRSI payment?

Unfortunately, no. The PRSI paid will be classified for the purpose of recording the contribution under PRSI Class K. Class K contributions do not give entitlement to any social insurance benefits based on the payment of the new PRSI charge.

Does this mean I have to file a tax return for 2014.

Yes. As before, individuals with unearned income exceeding €3,174 must pay and file under Revenue’s self-assessment system.

This article is for guidance only.

If you would like assistance with your tax affairs, please contact Coll & Co Chartered Accountants, Barna Galway by phone on 091-592080 or by email at info@coll.ie. Coll & Co specialises in personal tax and pensions advice. Coll & Co Chartered Accountants is regulated by the ‘Chartered Accountants Ireland’ to provide investment advice.

If you want to subscribe to Co