Frequently Asked Questions on the Broadening of the Income Base for PRSI


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Questions on the broadening of the base to be introduced on the 1 January 2014.

In Budget 2013 it was announced that from 1 January 2014, the exemption from PRSI applying to employed contributors and occupational pensioners under state pensionable age whose only additional income is unearned income, will be abolished. This means that unearned income such as rental income, investment income, dividends and interest on deposits and savings will be liable to PRSI. Interest on deposits and savings is currently liable to DIRT (increased to 41% from 2014 as announced by the Minister for Finance in his Budget 2014 speech). This income will now also become liable to PRSI at 4% for the above persons provided the person is a chargeable person in accordance with the Revenue definition as detailed below. This new PRSI charge will not give rise to any social insurance benefits.

Q. Who is liable?

All individuals over the age of 16 and under pensionable age who have earnings from employment or who are in receipt of an occupational pension and who have additional unearned income are liable.

Q. What income is liable?

All unearned income such as rental income, investment income, dividends and interest on deposits and savings is liable to the new PRSI charge.

Q. I am paying DIRT on my savings. Do I also have to pay the new PRSI charge?

Yes provided that you are over 16 and under pensionable age and that you are a chargeable person in accordance with the Revenue definition of a chargeable person (detailed below).

Q. What is a chargeable person?

A chargeable person does not include a PAYE taxpayer (i) who does not have other income or (ii) who has an element of other insignificant income that is fully taxed through the Revenue Commissioners PAYE system (Revenue regard amounts not exceeding €3,174 as insignificant. Individuals with income exceeding €3,174 must pay and file under Revenue's self-assessing system).

Q. When will this measure come into effect?

This measure will come into effect on the 1 January 2014.

Q. At what rate will I pay PRSI on this income and will I get any benefits from this?

This income will be chargeable to PRSI at 4% (Class K). This new PRSI charge will not give rise to any social insurance benefits.

Q. I am 67 years old, am I liable to this new charge?

Generally at pension age you are no longer liable to PRSI on any income regardless of its source.

Q. Will the bank deduct PRSI at source in the same way as DIRT?

No the banks are not involved in the collection of any PRSI liability. Collection will be through the Revenue self-assessment system.

Q. I am 61 years old and am a pensioner. My only other source of income is rental income. Will I have to pay PRSI on my rental income?

It depends on the amount of rental income that you have:

  • You will be liable if your rental income exceeds €3,174 as Revenue would consider you to be a chargeable person. You must pay and file under the Revenue's self-assessing system.
  • If your rental income is less than €3,174 Revenue will deal with your tax liability through the PAYE system and therefore you would not be liable for the PRSI charge.

Q. I am employed and my only other source of income is deposit interest on which I pay DIRT. Will I also be liable for PRSI?

It depends on the amount of deposit interest that you have:

  • You will be liable if your deposit interest exceeds €5000 as Revenue would consider you to be a chargeable person. You must pay and file under the Revenue's self-assessing system.
  • If your deposit income is less than €5000 ​​Revenue will deal with your tax liability through the PAYE system and therefore you would not be liable for the PRSI charge.

Q. My only sources of income are rental income and dividends from shares. I have been paying PRSI at Class S, will this change?

No, if your only source of income is unearned income then you will continue to pay PRSI at Class S.​​​​

Last modified:05/07/2016
 

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