Ireland: Social Welfare and Pensions Bill 2013 introduces PRSI amendments
28 October 2013
Posted by: Author: Cora O'Brien (Irish Tax Institute)
Author: Cora O'Brien (Irish Tax Institute)
The Social Welfare and Pensions Bill 2013 published on Wednesday of this week gives legislative effect to the social welfare measures announced on Budget Day.
It also gives effect to certain PRSI measures announced in last year’s Budget, Budget 2013.
From 1 January 2014, unearned income of certain employed contributors and occupational pensioners will become liable to PRSI at 4%. This will apply where all of the following conditions are satisfied:
- The individual is either an employed person or an occupational pensioner (whether the pension income arises from the individual’s own previous employment or that of a spouse or civil partner), and
- The individual is aged 16 years or over, but under the age of 66, and
- The individual has unearned income, i.e. income other than income from a trade, profession or partnership (e.g. investment income or rental income), and
- That "unearned income” is the individual’s only additional income aside from his/her employment or pension income, and
- The individual is a "chargeable person”, as defined in section 959A TCA 1997.
The Explanatory Memorandum to the Bill contains some further information on the definition of "chargeable person” – click here. Revenue Tax Briefing 62 also deals with the issue and states that: "An individual who is in receipt of income chargeable to tax under the PAYE system but who is also in receipt of income from other non-PAYE sources will not be regarded as a "chargeable person" if the total gross income from all non-PAYE sources is less than €50,000 and the net assessable income is less than €3,174 and the income is coded against PAYE tax credits”.
The following examples illustrate how this change will apply in the relevant circumstances:
1. An employed individual with gross rental income of less than €50,000 and net assessable rental income of €3,000 currently pays tax on this income through the PAYE system, by having their tax credits reduced. In practice, this person is not a chargeable person and their net rental income will not become subject to PRSI as a result of this week’s Bill.
2. An employed individual with net rental/interest income of €3,500 is a chargeable person and is therefore required to file a tax return. This person’s net rental/interest income will be subject to 4% PRSI from 1 January 2014.
Access the Bill and the Explanatory Memorandum on the Oireachtas website, where you can also track its progress through the Oireachtas.
Employer PRSI rate change - reminder
Although there is no reference to this measure in this week’s Bill, members are also reminded that the rate of Employer PRSI for all jobs that pay up to €356 per week will be increased from 4.25% to 8.5% from 1 January 2014. The rate had been halved under the Jobs Initiative but is scheduled to revert to 8.5% from 1 January 2014, as set out in the Social Welfare and Pensions Act 2011.
This article first appeared in irishtaxinstitute.createsend1.com