Mark Wall (Kildare South, Labour)
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294. To ask the Minister for Finance the changes that have been brought in that use the tax-free allowance of a pensioner on their State pension first, rather than any private pension they may have; and if he will make a statement on the matter. [3134/25]

Paschal Donohoe (Dublin Central, Fine Gael)
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I am advised by Revenue that there has been no change to the manner in which payments from the Department of Social Protection (DSP) are taxed.

The DSP State pension (contributory) is a taxable source of income, similar to other DSP payments including Jobseekers’ Benefit and Maternity Benefit. As such, it is liable to Income Tax (IT) although it is not subject to the Universal Social Charge (USC) or Pay Related Social Insurance (PRSI).

The State pension is paid gross to the recipient. Where an individual is in receipt of the State pension from DSP and also has an additional source of income such as an occupational pension, Revenue confirms that the mechanism used to collect the tax due on the gross DSP payments is by reducing the individual’s annual tax credits and rate band by the annual amount of their DSP income. Tax due on both the DSP income and any additional income will therefore be deducted from the additional income, only.

For example, for a taxpayer liable at the standard rate of tax of 20%, an increase of €5 per week in a DSP payment means that tax on an additional €260 per annum will be collected over the course of the year, by reducing a person’s tax credits by €52 for the year or €4.34 per month.

Revenue further advise that depending on particular circumstances, individual’s may also be entitled to certain tax credits; tax reliefs and exemptions in order to reduce the amount of tax due.