Emma earns €1,000 gross deposit interest in 2020 which is subject to DIRT at source. If Emma is a standard rate taxpayer in 2020, what additional income tax liability, if any, will she have on this interest?

• A. €200
• B. None
• C. €210
• D. €410

Answer: (B)

DIRT is a withholding tax on deposit interest deducted at source. For someone who pays tax at the standard rate, DIRT on interest effectively settles the tax due on that interest—the tax is taken care of before the interest is paid, so no extra income tax is payable on that income when you calculate overall liability.

In Emma’s case, €1,000 of gross deposit interest would have DIRT withheld at the standard-rate at source. Since she is a standard-rate taxpayer, that withholding covers the tax on this interest, leaving no remaining income tax to pay on it. So there is no additional income tax liability on this €1,000 of interest.