Gerald Nash (Louth, Labour)
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604. To ask the Minister for Finance if he plans to make any changes to the personal tax system applied to the State pension where a PAYE worker has continued in paid employment after reaching the qualification age for the pension; and if he will make a statement on the matter. [20693/25]

Paschal Donohoe (Dublin Central, Fine Gael)
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It is a general principle of taxation that all income, from whatever source, is income for tax purposes and this includes amounts paid to an individual by the Department of Social Protection (DSP), unless specifically exempted by legislation.

Section 19 of the Taxes Consolidation Act 1997 (TCA 1997) provides that income from offices or employments, and from annuities, pensions, or stipends payable out of State funds, is within the charge to tax under Schedule E. A charge to tax under schedule E is imposed in respect of certain Social Welfare payments by virtue of section 126 of the Taxes Consolidation Act 1997.

Section 112 TCA 1997 charges income tax on all Schedule E income received in a year, with the exception of proprietary directors who pay tax in the year the income arises. Therefore, all payments from the Department of Social Protection are considered taxable under Schedule E unless specifically exempted from income tax. Section 126 (6A) TCA 1997 provides for the exemption of certain payments from the Department of Social Protection from income tax which are listed in the table within Section 126 TCA 1997. As the State Pension (Contributory) and State Pension (Non-Contributory) are not exempt payments within this table, they are taxable.

In relation to these payments it should be noted that the State pension is paid gross to the recipient. Where an individual is in receipt of the State pension from the DSP and also has an additional source of income such as employment income, in general, the mechanism used by Revenue 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 payment/income. Tax due on both the DSP income and any additional income will therefore be deducted from the additional income, only.

It should also be noted that a person’s tax liability depends on his or her personal circumstances of the recipient, taking into account factors such as the individual's other sources of income and the available tax credits and standard-rate bands. An individual whose sole income is the State Pension (Contributory) or the State Pension (Non-Contributory), payable by the Department of Social Protection, would not incur a tax liability because of the tax credits available.

As the Deputy will appreciate, decisions regarding tax incentives and reliefs are normally made in the context of the annual Budget and Finance Bill process. Such decisions must have regard to the sound management of the public finances and my Department's Tax Expenditure Guidelines. However, I currently have no plans to make any changes in relation to the tax treatment of the State Pension.