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Q. I don’t really understand how social welfare payments
are taxed. Can you explain?
12.02.12
If you have a social welfare payment and another source of
income, you may have to pay tax on your combined income. Some social
welfare payments are not taxable, but most long-term payments, such
as old age pensions or widowed people’s pensions are. Illness
Benefit and Invalidity Pension are also taxable.
Your taxable social welfare payment and your other income are added
together. You are taxed on the total amount. There is no mechanism
for taxing your social welfare pension at source (before it is paid
to you). Your other income determines how tax due is paid.
For example, If you are getting a State Pension (Contributory) and
an occupational pension. Your occupational pension is taxed through
the
PAYE system in the same way as a wage or salary. This means that
you get your tax credits in the normal way.
In order to tax your social welfare pension, your annual tax credits
are reduced by the tax liability on your social welfare pension. You
then effectively pay tax on both the pensions, but it is collected
from the occupational pension. If your other source of income is not
taxed on the PAYE system, for example, if you have investment income
or you have an
occupational pension from abroad, then you are classed as a
self-employed person and your tax is payable annually by
self-assessment, due by 31 October each year.
Citizens Information: Buncrana 074 9363496; Carndonagh 074 9373741
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