Dáil Éireann Debate, Tuesday - 13 January 2026
883. Deputy Ged Nash asked the Tánaiste and Minister for Finance if he will obtain the position of the Revenue Commissioners on a policy matter (details supplied); and if he will make a statement on the matter. [2303/26]
Amharc ar fhreagraI am informed by Revenue that Section 19 of the Taxes Consolidation Act 1997 (TCA 1997) provides that income from offices or employments, and from annuities, pensions, or stipends payable out of State funds, is within the charge to tax under Schedule E. In addition, section 126 (2) TCA 1997 specifically provides that payments made under the old age (contributory) pension (now known as the State pension (contributory)) are deemed to be emoluments to which Chapter 4 of Part 42 (Collection and recovery of income tax on certain emoluments (PAYE system)) applies.
As the Deputy's question outlines, the State pension has always been paid gross to the recipient by Department of Social Protection (DSP). 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 receive a revised Tax Credit Certificate (TCC) valid from 01/01/2026 to reflect the taxation of their taxable income from DSP.
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.
All customers who were granted a deferral were written to last year to advise them of this change.
In relation to the query about specific tax credits, etc., for pensioners, I am advised by Revenue that Section 464 TCA 1997 provides for the 'age tax credit' for individuals aged 65 or over. The credit is due in the year that an individual reaches the age of 65 and is granted for the full tax year. The value of this credit is €245 for a single individual and €490 for a jointly assessed married couple and is granted when the older spouse or civil partner reaches the age of 65.
Consequently, the effective entry point to income tax for a single individual aged 65 or over in receipt of the basic personal tax credit, employee tax credit and age tax credit is €21,225 per annum. This means that a single individual can potentially earn up to €21,225 before they pay income tax in 2026. Married couples or civil partners can potentially earn up to €42,450 per annum before they pay income tax in 2026, depending on their particular circumstances.
Alternatively, an individual may not have to pay income tax if they or their spouse or civil partner, are aged 65 or over and qualify for an exemption from income tax. The exemption limits are €18,000 in respect of a single individual or €36,000 for married couples and civil partners with increases for dependent children. If an individual’s income is above these limits but less than twice the limit, they may qualify for Marginal Relief.
Further information on tax credits is available at the link below:
www.revenue.ie/en/personal-tax-credits-reliefs-and-exemptions/tax-relief-charts/index.aspx
