Dáil Éireann Debate, Tuesday - 10 February 2026
433. Deputy Paula Butterly asked the Tánaiste and Minister for Finance to outline whether persons affected by changes in the methods of enforcement and/or taxation of a State pension while in receipt of an additional occupational pension were informed of these changes in advance; the degree to which these communications were issued; and if he will make a statement on the matter. [10330/26]
View answerI note the Deputy's question on changes to the tax treatment of the State pension for individuals in receipt of an additional occupational pension.
The State Pension (Contributory) is a taxable source of income, as provided for in Section 126 of the Taxes Consolidation Act (TCA) 1997, and while it is paid gross to the recipient, it is liable to Income Tax although it is not subject to the Universal Social Charge (USC) or Pay Related Social Insurance (PRSI).
Revenue and the DSP have a long-standing data-sharing arrangement between both organisations which facilitates the operation of both the tax and welfare systems. Data has been shared over a number of years in relation to taxable welfare payments - such as pensions and long-term benefit payments, which allows tax to be deducted throughout the tax year instead of creating a full year’s tax bill at the end of the year.
Where a person in receipt of payments from DSP also has an additional source of employment or occupational pension income, the mechanism used to collect tax due is by reducing the person’s annual tax credits and rate band, by the annual amount of their DSP income. This ensures that the DSP payment is paid gross to the recipient, while the salary or pension, as paid by their employer, will have any tax due on both the DSP income and the employment deducted from it.
A change was made from the beginning of 2025 to how Revenue collects tax due from certain individuals in receipt of income from the DSP. This change affected customers who are registered with an employer/pension provider, receive income from DSP, and are also a chargeable person in receipt of additional income not taxed via PAYE. Such persons would be obliged to file an annual Form 11 to return their income, including income from DSP.
This change allowed such taxpayers to pay the correct amount of tax in the year the income was earned from 2025 onwards, as Revenue reduced annual tax credits and rate band on Tax Credit Certificates (TCC) to take account of any taxable income from DSP. This aligned with the current method for those earning PAYE income who are also in receipt of income from DSP.
This change was made for all such customers, with the exception of those who sought to defer this change until the beginning of 2026. On request, a deferral was granted to the reduction of taxpayers' tax credits and rate band until 01/01/2026. This deferral opportunity ended in 2025 and these taxpayers will have received a revised Tax Credit Certificate (TCC) valid from 01/01/2026 to reflect the taxation of their taxable income from DSP. All customers who were granted a deferral were written to last year to advise them of this change.
When completing the 2025 Form 11, a taxpayer's DSP income will be automatically pre-populated on the return (on a table for their review and inclusion on the Form 11). As usual, taxpayers need to declare all income sources on the Form 11.
Revenue has informed me that a Tax Credit Certificate issues to all individuals in receipt of PAYE income (employment or occupational pension) outlining the allocations of their tax credit and rate band entitlements. If an individual is also in receipt of the State Pension (Contributory) from the Department of Social Protection (DSP), this income is also included on his or her Tax Credit Certificate.
