The A-Z of Tax Terms for High-Income Earners and Retirees in Ireland

The A-Z of Tax Terms for High-Income Earners and Retirees in Ireland

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Taxation is crucial to personal and business finances. However, finding reliable information about it online can be a minefield. From irrelevant information to overly complicated terms, it can be tough to cut through the noise—especially if you’re on a tight deadline!

To simplify things, our team is here with a guide of Irish tax terms from A to Z. 

Below, you’ll find essential information regarding tax terms in Ireland targeted at individual taxpayers and business owners in the following categories:

  • High-income earners
  • Retirees and pensioners

Let’s get straight to it!

Tax Terms for High-Income Earners

A brightly coloured office desk in a well lit office

For high-income earners, optimising their tax liabilities is not only smart but essential for maintaining financial health and keeping their finances aligned with future goals.

But, to optimise your taxes as a high-income earner, you’ll need to understand some key terms.

Here are some of the most common tax terms you’ll want to be familiar with as a high-earner in Ireland:

Approved Retirement Fund (ARF)

In short, ARFs are special investment funds intended for post-retirement individuals. 

Rather than converting your pension fund into monthly payments (known as annuity), ARFs enable you to keep your pension savings invested in the market after you retire. 

This gives high-earners flexibility and control over their retirement savings and the opportunity to ensure retirement income.

Benefit in Kind (BIK)

BIK is a term used to describe non-cash benefits provided by employers to employees that are still subject to tax. High-income earners often receive generous benefits from employers, like company cars or private health insurance, both of which fall under BIK taxation.

Note: From 1 January 2022, you can give employees up to two small benefits, tax-free, each year. This will qualify as a Small Benefit Exemption.

Capital Acquisitions Tax (CAT)

Capital Acquisitions Tax (CAT) is a tax levied on gifts and inheritances received by individuals. High-income earners may need to consider CAT implications when receiving large gifts or inheritances to ensure full compliance with tax laws.

Note: Capital Acquisitions Tax is currently charged at 33% on gifts or inheritances made on or after 5 December 2012 (the rate was formerly 30%).

Irish Tax is complicated and hard to understand. Our FREE guide demystifies what you can do to save money TODAY. Download the guide now and learn how to keep more money in your pocket.

Deposit Interest Retention Tax (DIRT)

DIRT Tax is a tax deducted from interest earned on deposits at the source. High-income earners with substantial savings accounts should be aware of DIRT obligations, which apply to interest income generated from deposits. 

Since 2020, DIRT has been charged 33% on all interest payments.

Domicile levy

In Ireland, the domicile levy applies to all Irish-domiciled individuals who meet the qualifying criteria—primarily those with significant property and financial assets. 

Your tax bill will likely include a domicile levy if:

  • You are Irish-domiciled
  • Your worldwide income in the year exceeds €1m
  • You have Irish property with a value greater than €5m, and
  • Your Irish Income Tax for the year is less than €200,000

For more information on where you are tax-domiciled, see here.

Exit Tax

Exit Tax is a tax imposed on gains from certain investments upon withdrawal. High-income earners investing in funds or financial products should understand Exit Tax implications when redeeming investments, as this will impact their overall investment returns.

Flat-rate expenses

Flat-rate expenses refer to the cost of equipment that you might need for work.

In some cases, tax deductions for these expenses may apply to employees in certain professions like healthcare or construction (without the need for receipts). 

You can find further details on flat-rate expenses and deductions here

Gross Pay

Gross Pay is the name given to total earnings before deductions for taxes and other costs. High-income earners need to understand their gross pay to assess their overall income level and tax liabilities accurately and ahead of time.

High-Income Earner Restriction (HIER)

HIER is the term given to the limit placed on certain tax reliefs for high-income individuals. 

The restriction may apply to you if:

  • Your income is greater than or equal to €125,000 
  • Your total reliefs are greater than €80,000

or

  • The sum of your reliefs is greater than 20% of your adjusted income.

Tip: High-earners are advised to seek advice from a professional tax consultant to discuss tax planning strategies that can help balance out this restriction.

Income levy

An income levy is an additional tax applied to income above a certain threshold. As a high-income earner, you may be subject to income levies that impact your overall tax liabilities and financial planning.

Tip: High-income earners should always stay on top of the latest budget announcements (usually announced in October each year) to stay informed about changes in income levy rates and thresholds.

Joint assessment

Joint tax assessment evaluates a couple’s combined income and tax liability based on marriage or civil partnership. 

High-income earners considering joint assessment should speak directly with a tax advisor to potentially reduce overall household tax liabilities.

Local Property Tax (LPT)

Local Property Tax is a tax applied to residential and commercial properties based on the property’s value. As LPT is self-assessed, all property owners in Ireland should ensure they understand their obligations. 

These include assessing the market value of your properties accurately and filing LPT returns on time. Additionally, you should stay informed about any updates or changes to LPT regulations to remain compliant with Irish tax laws.

Note: Every owner of Irish property is required to pay Local Property Tax, whether they live in Ireland or abroad.

To calculate your Local Property Tax, use this online calculator

Marginal relief

Even if your total income is more than the exemption limit, you may still be able to claim marginal relief if:

  • You, or your spouse or civil partner, is over 65

and

  • Your total income is less than twice the exemption limit

Non-resident tax issues

Non-resident tax issues is a term generally used to describe tax implications for those living or working outside of Ireland. 

For example, high-income earners with international income or residency will likely need to speak directly with a tax advisor to develop tax strategies that comply with tax laws in multiple jurisdictions.

For more information on potential non-resident tax issues, see some of our most popular articles and guides:

Occupational pension

An occupational pension is a pension plan provided to employees by an employer. High-income earners may have substantial occupational pension contributions, affecting overall tax strategies and retirement planning.

Note: Occupational pension schemes are still taxable sources of income (though relief may apply) and are liable to Income Tax, Universal Social Charge (USC), and PRSI unless otherwise stated. 

Ordinary residence

Ordinary resident is the term used to describe an individual’s liability to Irish tax on both Irish and worldwide income. 

Generally, if you have been a tax resident in Ireland for three consecutive tax years, you become ordinarily resident from the beginning of the fourth tax year. 

For more on Irish tax residency, see this article. 

Preliminary tax

Preliminary tax refers to your estimated tax payments and related charges payable by you for a tax year. When calculating your preliminary tax payment, you should ensure that it covers your liability to PRSI and Universal Social Charge, as well as Income Tax. 

Note: In Ireland, tax returns must be filed by 31 October. 

Rent-a-room relief

Introduced in 2001 to ease housing pressures, rent-a-room relief is a tax relief for individuals renting out a room in their primary residence. 

High-income earners with spare rooms may benefit from rent-a-room relief, generating additional income while minimising tax liabilities.

Stamp Duty

Stamp Duty is a tax on certain documents, including property transfers and share transactions. 

In Ireland, Stamp Duty rates for residential properties are 1% on the first €1 million, and 2% on the excess over €1 million. 

Note: This applies to written documents executed (signed, sealed, or both) on or after 8, December 2010.

Tax exemption limits

Tax exemption limits are thresholds beyond which certain income or gains become taxable. 

For high-income earners, being aware of these exemption limits is vital for ensuring compliance with tax laws and also optimising tax planning strategies.

For more information on optimising your tax planning strategies, see the following guides:

Universal Social Charge (USC)

USC is essentially a tax on income like earnings, dividends, and rental income. 

As a high-earner, if you’re unsure about what qualifies as income, always consult with a qualified tax advisor to discuss your liabilities and optimisation options.

Note: For high-income earners, the USC exemption for income under €13,000 (for the year 2024) will not apply. However, some other payments and allowances may be exempt from USC. For more on this, see the Revenue website

Year of assessment

Your year of assessment refers to the tax year in which your income is assessed for tax purposes. By better understanding when tax needs to be paid, high-income earners can conduct more accurate financial planning while maintaining tax compliance.

Irish Tax is complicated and hard to understand. Our FREE guide demystifies what you can do to save money TODAY. Download the guide now and learn how to keep more money in your pocket.

Tax Terms for Retirees and Pensioners

An older couple happily looking at a laptop screen

Planning for retirement can already be a daunting prospect. When tax matters are added to the mix, things can get even more overwhelming! 

Luckily, many of the tax terms relating to retirement and pensions aren’t as complicated as they sound, it’s just a matter of knowing what you’re looking for.

So, as a retiree or pensioner in Ireland, here are some of the tax terms you’re likely to come across:

Age Tax Credit

The Age Tax Credit is a tax credit (a deduction from the amount of tax owed) available to individuals aged 65 or older in Ireland. 

You may be able to claim the yearly Age Tax Credit if you are:

  • Aged 65 years or older in the tax year

Currently, the Age Tax Credit is as follows:

  • Single, widowed, surviving civil partner, or singly assessed receive €245 in credit
  • Jointly or separately assessed receive €490 in credit

Note: Information is correct as of March 2024.

Beneficiary

In simple terms, a beneficiary is a person entitled to receive benefits from a trust, pension, or insurance policy. 

Retirees and pensioners should designate beneficiaries for their pension funds and estate as part of the inheritance planning process, ensuring that assets are distributed according to their wishes.

For a guide on inheritance planning for expats moving to Ireland, see this article

Deposit Interest Retention Tax (DIRT)

DIRT is a tax deducted on interest earned on savings and deposits. 

Retirees and pensioners with savings accounts are advised to work with a professional tax advisor to understand their DIRT obligations and ensure investment returns are optimised and in line with tax regulations.

Note: Since 2020, DIRT is charged at 33% on all interest payments. (In 2019, the rate was 35%)

Elderly tax credits and reliefs

In Ireland, there are several tax credits and reliefs available to elderly individuals. 

For example, retirees and pensioners may qualify for tax relief in the following categories:

And, as a retiree or pensioner, your family may also be entitled to:

  • Deed of Covenant (If a relative or another individual contributes to a deed of covenant, they may be able to claim relief on the contribution of up to 5% of their income.)

Exemption limits for pensions

Retirees and pensioners should be aware of exemption limits for pension contributions. This can not only help you optimise your tax planning strategies, it can also enhance your retirement savings.

For more information on optimising your tax planning strategies, see the following guides:

Gross Retirement Income

Gross retirement income refers to the total income received from pensions and other retirement sources. Retirees and pensioners should always assess their gross retirement income ahead of time, for more accurate tax planning and financial management.

For more on this, see the following guides:

Inheritance Tax

In Ireland, Inheritance Tax is another name for Capital Acquisitions Tax (CAT) — a tax on gifts and inheritances. 

As a pensioner, it’s important to consider how the transfer of your assets from one person to another will work upon death, and if possible, how it can be optimised in your estate planning strategy.

Jobseeker’s Benefit

The Jobseeker’s Benefit involves receiving financial support during periods of unemployment. While it’s often associated with those of standard working age, retirees and pensioners may be eligible for jobseeker’s benefits if they re-enter the workforce after retirement. 

Knock-on effects of pension withdrawal

When planning your pension, it’s vital to consider the tax implications of withdrawing funds from a pension. Retirees and pensioners should understand the knock-on effects of these withdrawals, including potential tax liabilities and impact on retirement income.

We recommend researching the services of a tax professional, specific to retirees living in Ireland.

Old Age Pension

As part of the Irish Social Welfare System, individuals reaching retirement age are entitled to apply for an Old Age Pension to supplement their retirement income and ensure financial stability in retirement.

This pension, also known as the State Pension (Contributory), is available to those aged 66 and over, provided you’ve made enough social insurance (PRSI) contributions.

Note: If you apply for your State Pension (Contributory) in 2025, there will be changes to how your pension is calculated. For more on this, book a consultation with a professional tax expert to streamline the process.

Rent Supplement

For those who qualify, a Rent Supplement may be granted by the Government to provide financial assistance to individuals renting private accommodation. 
For example, retirees and pensioners struggling with housing costs may qualify for rent supplements — but the supplement is strictly means-tested (more information on which can be found here).

State Pension (Contributory)

Also referred to as the Old Age Pension, Ireland’s State Pension is a social welfare payment granted to retirees with sufficient PRSI contributions. 

Note: Retirees are advised to apply for their State Pension 3 months before reaching 66 to receive support on time.

Tax-free lump sum on retirement

In some cases, a lump sum payment from a pension scheme may be exempt from tax. 

As a retiree, it’s important never to make assumptions about your tax liabilities. Instead, consult with an expert to keep your retirement savings compliant and optimised. 

Universal Social Charge (USC)

USC refers to tax on income, including pensions, earnings, and investment income. 

Your income will be exempt from USC if it is less than the exemption limit. The exemption limit for 2024 is €13,000.

Some other payments and allowances are also exempt from USC. For more on this, see the Revenue website.  

Voluntary contributions

Voluntary contributions refer to additional pension contributions made by individuals to supplement their retirement income. 

Retirees and pensioners may consider voluntary contributions to boost their retirement savings and ensure financial security in retirement.

Yearly tax return (for retirees and pensioners)

As a retiree or pensioner in Ireland, your yearly tax return refers to the process of reporting your income, deductions, and tax credits to determine the amount of tax you owe to the government. 

You must file your return and ensure all tax is paid by 31 October following the end of the tax year. 

Note: When completing your tax return, you’ll need to accurately report all sources of income, including pensions, investments, and any other earnings. 

Still feeling overwhelmed by tax terms? You’re not alone!

Luckily, there’s always support available from Expat Taxes to simplify things.

Providing one-on-one tax assistance, tailored to your unique situation and tax planning goals, we’re here to take the stress out of tax compliance and optimisation. Giving you complete peace of mind and helping you save money, our award-winning tax consultancy team is on hand to help.

Book your consultation today, or find out more about the type of people we work with here.

Irish Tax is complicated and hard to understand. Our FREE guide demystifies what you can do to save money TODAY. Download the guide now and learn how to keep more money in your pocket.

DISCLAIMER: The material in this article is for general information purposes only and does not constitute legal or taxation advice. Specific legal, financial, investment and taxation advice should be sought before acting or refraining from acting. All information and taxation rules are subject to change without notice. Expats Taxes accept no liability whatsoever for any action taken based on the information in this article or any of the articles in our blog series. Expat Taxes Limited does not provide financial planning, investment, or mortgage advice, and this article is provided only for general information. We are not authorised/licensed to provide financial advice and this article should not be considered to constitute advice of this type in any respect.

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