My mother deposited money in AIB around 2001. The funds were proceeds from the sale of the family house after my father's death. She has recently received a letter from Revenue.
As I understand, she will now have to pay tax on any interest accrued on this account. Could you confirm this? I think the amount is around £20,000.
I have explained to her that whether her money is in Ireland or Britain, she will have to pay tax. Is it advisable for her to withdraw the money and transfer it to the UK?
Mr JH, UK
I’m a little confused as to why she would be receiving notification of this just now.
It appears to me that we are talking here about Deposit Interest Retention Tax, known as Dirt. This is payable on any interest earned from an account with a bank, building society or, in some cases, An Post.
The tax is pretty onerous. It is currently levied at 39 per cent – down from 41 per cent last year – and it doesn’t matter how low the level of savings are or the amount of interest that has been paid. In an era of already low interest rates, that doesn’t leave much room for your money to grow.
But this tax has been around for a long time, which is why I am surprised she is only now being told about it, given the money has been deposited as far back as 2001. And, it is deducted at source, so I am confused about why she is being asked to pay it.
Assuming it is Dirt, it is possible that she may be able to claim an exemption. If you are over the age of 65 and your income is below the exemption limit for income tax – €18,000 in the case of an individual like your mother, or €36,000 for a couple – you are not liable for Dirt.
By filling out and submitting a Form 54D – available online – you can claim a refund of Dirt already paid. And filling out a separate Form DE1 ensures that future interest is exempt from Dirt.
Of course, if your mother’s income is above the €18,00 exemption limit, she is liable for Dirt, regardless of age.
I cannot think what else such a tax demand might relate to. They have changed the rules here on unearned income and liability to social insurance (PRSI) but people are exempt from that over the age of 66.
Moving her savings to the UK is not really going to do her any good. As an Irish taxpayer, she would still have to declare UK interest on her savings – and would have to file a tax return to do so.
What she could do is move her savings – or a chunk of them – into tax-free post office savings certificates or savings bonds. These are three- and five-year savings products but access is available if required, albeit with a loss on interest. Importantly, they are exempt from Dirt.
Send your queries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara Street, Dublin 2, or by email to dcoyle@irishtimes.com. This column is a reader service and is not intended to replace professional advice
