Deputy John Deasy asked the Minister for Finance if his attention has been drawn to the fact that the 10 percent tax on UK dividends paid to Irish residents, which is deducted at source in the UK, is then subject to tax here at the marginal rate on the net 90% received and that this means tax on UK dividends is now the highest rate of tax on income; his views that this is fair on pensioners who were relying on UK dividends to top up their income; and if he will make a statement on the matter.
REPLY (October 21, 2014)
Minister Michael Noonan:
I am informed by the Revenue Commissioners that the 10% tax referred to by the Deputy is part of the tax paid by the company and not a tax on the dividends themselves. Accordingly, dividends paid by a UK company to an Irish resident taxpayer are not subject to any taxation in the United Kingdom.
Where a pensioner has UK dividend income, it is taxable in the normal way in this country. However, pensioners are entitled to an additional tax credit and/or greater exemption ceilings, which are not available to other taxpayers.
Any individual or a couple in a marriage or civil partnership, aged 65 or over, whose income from all sources (including any UK dividend income) is less than or equal to the exemption limit will not have to pay income tax for that year. The exemption limit applies where the total income is less than €18,000 for a single individual, widowed person or surviving civil partner and €36,000 for a married couple or civil partnership couple.
These exemption limits are increased by €575 for each of the first two children and by €830 for each subsequent child.
Any individual or a couple in a marriage or civil partnership aged 65 or over whose income from all sources is slightly over the exemption limit may qualify for marginal relief. Marginal Relief will only be granted if it is more beneficial to the claimant than their tax credits.
In addition, the over 70s are only liable to a maximum rate of USC of 4% on their income where it does not exceed €60,000. This rate is reducing to 3.5% from next year as part of the Budget changes to the income tax system.