I have recently started investing in the stock market. I own several shares in the FTSE 100 and have a couple of holdings on the Irish Stock Exchange. Although I receive small amounts in dividend now, I wonder where I stand in relation to tax on any dividend received in years to come when, as my holdings increase, so too will dividend payments.
Mr TG, email
Interesting to hear that people are back playing the stock market – the recovery in the economy must truly be under way if consumer sentiment was evolved to this.
The slight confusion on your part is that dividend income only becomes an issue for you when there is more of it to worry about.
Dividend income, under Irish tax law, is simply another form of income, No matter how small your current dividends, they still count as income and must be added to your income from other sources – including the day job – in order to assess tax liability.
While Irish dividends withhold tax at the basic rate of income tax, if you are a higher-rate taxpayer you are likely liable to income tax at your marginal rate on all dividend income. You will also find yourself liable to universal social charge and possibly even PRSI, all of which will leave you little from your currently limited dividends to enjoy. Small-gift exemption on inheritance? I have been fortunate to have been left €10,000 as a bequest in the will of my friend – no relation. The money was paid through a solicitor in May 2015 and I am aware I have to pay the capital gains tax due before mid-December 2015 at the 33 per cent rate.
Can I claim the €3,000 small gifts exemption leaving €7,000 taxable at 33 per cent, namely, €2,310, or am I taxable on the full €10.000 at 33 per cent per cent, namely, €3,300?
Mr FD, email The small-gift exemption applies only to gifts – ie to disbursements made during the lifetime of the person making the gift. You cannot claim the small-gift exemption in relation to an inheritance.
So where does that leave you? Well,not necessarily with a tax bill on the full amount. It all depends on what, if any, other inheritances – or gifts in excess of the €3,000 limit – you have received since December 1991.
Inheritances from “strangers” – ie anyone other than blood relatives – come under Category C of the capital acquisitions tax regime.
For these sorts of inheritances, you can receive up to €15,075 cumulatively without incurring a liability to capital acquisitions tax which, as you say, is levied at 33 per cent.
On that basis, if this is the first inheritance or gift you have received from a friend, you are not liable to any tax at all. What counts for dependant allowance? In your recent answer to my query about adult dependant allowance, you mention if the dependant's gross weekly income is less than €100, the full qualified payment should be made.
However, as interest on deposits are so low at the moment, is there a maximum asset figure that may be held by the dependant in terms of qualifying for the full payment? What about a holiday home in joint names – is this regarded as a dependant's asset?
Mr TM, email
Capital held by the adult dependant is taken into account in determining eligibility for the qualified dependant payment.
Anything like a jointly held holiday home will be deemed to be 50 per cent-owned by the partner/spouse and will be considered to be delivering a weekly income.
While the first €20,000 of any capital is not taken into account, the next €10,000 yield weekly income of €1. This rises to €2 on the next €10,000 and to €4 a week on anything beyond this.
Tax relief on private homecare I have just read your article about tax relief on private homecare from a couple of months ago. I am confused because you are saying that the mother is entitled to tax relief because she transferred the money to her son. On the other hand you indicate that the transfer would be treated as a gift for capital-acquisition purposes. If this is the case surely the money belongs to the son and should be allowable for tax purposes.This strikes me as double taxation. Could you please clarify the position for me.
Mr NH, email
What I am saying is that whoever pays the bill is entitled to the relief. If the son pays the bill, well and good; if, however, he is paying the bill with money given to him by the mother, it is effectively she who is paying the bill.
In that case, it is either she who is entitled to relief – which is of no use as she pays no tax – or the money given to the son constitutes a gift on which he can gain tax relief, but which will have to be taken into account under the separate heading of capital acquisitions tax.
Send your queries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara Street, Dublin 2, or email dcoyle@irishtimes.com. This column is a reader service and is not intended to replace professional advice.
