PERSONAL FINANCE:Your queries answered

Q

The recent Budget states that the health levy and the income levy will be replaced by a single universal social charge. As a retired public service employee, a 2 per cent income levy is deducted from my pension.

However, a health levy deduction is not made. What is the position therefore with regards to my liability for the new universal social charge?

- Mr BMcE, Louth

A

As I think you already suspect, you are going to find yourself liable for the universal service charge.

As you say, under the old system, not everyone paid the levies. The income levy kicked in at incomes of €15,000, while the health levy did not become a factor until a person’s income exceeded the €25,000 level.

The universal social charge is far more sweeping.

Unless your income is below the somewhat odd figure of €4,004 – which is unlikely as you have been paying the income levy – you will be liable for the charge. And it’s not just on any income above that €4,004 level. Once you exceed that threshold, you pay the charge on all your income.

There are some sources of income which are not taken into account in calculating the charge. Prime among these are social welfare payments, including the State pension.

For most people, the next most likely income to be exempted is interest income on your savings, on which you will already have paid DIRT at the new higher level. Income from An Post savings certificates is also exempt.

Unlikely though it might be for a pensioner, those in receipt of child benefit will also have that income discounted when assessing the charge.

Everyone liable to the charge will be taxed at 2 per cent on the first €10,036 of their income (where do they get these figures?). For most people, including pensioners, a 4 per cent charge is levied on income between €10,036 and €16,016.

Above that level, in general, you will pay 7 per cent on any additional income. However, if you are over 70 years of age, the 7 per cent band does not kick in. The maximum level of charge for people in this position is 4 per cent but there is no ceiling on the income on which the charge is levied.

Will my partial pension be hit?

Q

I am on only a partial pension. The figure involved is below the €4,000 entry point for the new social charge. Can I confirm that I will not have to pay the charge?

- Ms AO’S, Dublin

A

Yes, you are exempt from the charge but that does not mean you will not have to pay it – initially at least.

There is some confusion about this, in large part because the provision has not yet been published in the Finance Bill.

If your income comes from a source other than social welfare, and especially if it comes in lump sums rather than spread evenly across the year, it appears that the charge may be deducted with you having to claim a refund at the end of the year.

If, on the other hand, you rely solely on social welfare or interest income, it appears that no deductions will be made.

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