Dáil Éireann Debate, Thursday - 12 February 2026
293. Deputy Cian O'Callaghan asked the Tánaiste and Minister for Finance if he is aware of an error in 2025 and 2026 tax clearance certificates (details supplied); the action he is taking to ensure this does not happen again; and if he will make a statement on the matter. [11499/26]
View answerIn response to Deputy O'Callaghan's question, I would like to restate that the State Pension (Contributory) is subject to income tax under Section 126 of the Taxes Consolidation Act 1997. While paid gross to recipients, it is liable to income tax but exempt from USC and PRSI. Additional payments such as bonuses follow the same tax treatment.
Revenue has informed me, in advance of each tax year, 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 their Tax Credit Certificate.
For individuals with both a State Pension (Contributory) and other sources of income such as an occupational pension, Revenue confirms that the mechanism used to collect the tax due on the gross DSP payments is by reducing the individual’s annual tax credits and rate band by the annual amount of their DSP income. Tax due on both the DSP income and any additional income will therefore be deducted from the additional income.
Revenue has advised me that they initially annualised the State Pension (Contributory) over 54 weeks in 2025 anticipating 54 payments similar to 2024 - which included an extra bonus payment.
Following the Budget announcement in October 2025, it was confirmed that only 53 payments would be made in 2025, Revenue immediately amended the Tax Credit Certificates of recipients of the State Pension (Contributory). These within-year amendments issued on a cumulative basis - allowing any overpaid income tax to be automatically refunded through recipients' occupational pension or employment payroll.
Regarding tax year 2026, Revenue has informed me that there are 53 payments due to recipients of the State Pension (Contributory) this year and Revenue have factored-in an additional Christmas Bonus payment. Consequently, the State Pension (Contributory) is annualised by 54 weeks on their records, as reflected on their Tax Credit Certificates.
Finally, Revenue has confirmed there is no legislative basis within the Taxes Consolidation Act, 1997 for the payment of interest in this matter.
