PERSONAL FINANCE:Your queries answered
Q
I am retired from the public sector, single and have a pension of around €45,000.
I invested €10,000 in Anglo Irish Bank and a further €10,000 in AIB. Separately, I have earned about €1,400 in dividends from Ryanair and GSK.
I think I am allowed about €1,200 in respect of profit before Dirt kicks in. Can I offset any profit over the minimum threshold in shares against losses I incur in other shares?
I also have an investment in gold – €20,000 bought four years ago. It is now worth over €30,000. If I decided to encash my gold investment, could that €10,000 profit be ameliorated by my losses in AIB and Anglo?
– Mr DMacN, e-mail
A
There are a whole clatter of issues within the scenario you present and they are confusing the issue slightly.
Your mistake is in thinking you can offset dividends against the losses on your shares and, while I’m at it, Dirt is not relevant to your position.
Let’s separate the issues. You have dividend income of €1,400. This is income and is liable to income tax, not Dirt. However, UK and Irish dividends will have been paid to you net of dividend withholding tax. That means you have already paid 20 per cent tax on your dividends. Given your income, you appear to remain liable to the difference between that and the top rate – ie, you owe a further 21 per cent of your €1,400, a figure of €294.
You will also have to pay the new universal social charge on the dividend income.
Turning to your other shares and to the gold, the purchase and sale of such assets comes under the capital-gains-tax regime, which has nothing to do with income tax.
It allows you to offset a loss on the sale of one asset against gains realised on the sale of others. In your case, you are down around €20,000 on your investments in AIB and Anglo Irish Bank. The losses are already realised on the Anglo stock following its nationalisation and will materialise on the AIB shares when you either sell them or they become worthless under a full nationalisation of that bank.
You can offset those losses against any gain that you realise by selling the gold. Bear in mind that the losses can be carried forward and do not require you to sell your gold investment until you are ready to exit.
For illustration: if you realised a €10,000 gain on the gold, you would offset €10,000 of your bank share losses, leaving you with no capital gains tax to pay. You would then carry the rest of the losses forward to offset against future capital gains.
Are Post Office Bonds liable for the USC?
Q
The universal social charge does not apply to deposit interest which is liable for Dirt. Does it apply to the interest on Post Office bonds, which are not liable for Dirt?
– Ms JM, e-mail
A
As you say, the universal social charge does not apply to income on which Dirt has already been levied. It is one of the exemptions specifically listed in the legislation.
Interest on An Post Savings Certificates is also on that list and, I assume, the same applies to savings bonds as both are equally “tax free”.
This column is a reader service and is not intended to replace professional advice. No personal correspondence will be entered into. Please send your queries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara Street, Dublin 2. E-mail: dcoyle@irishtimes.com
