All across Ireland thousands of self-employed individuals, company directors, landlords & others are currently contemplating the arduous task of preparing their 2018 tax return that is due to be filed next month.
Everyone wants everything filed accurately minimising the risk of a Revenue enquiry into their tax affairs. However, people also want to reduce their tax bill. They only want to pay what they need to and not a cent more.
Here are 5 simple steps you can take in 2019 to reduce your tax bill:
1. Pay money into a pension
Pensions are a very tax-efficient way of saving. The Government provides generous tax relief at your highest tax rate to encourage people to pay into their pension.
Your age and your earnings for the year will determine the maximum amount that you can pay into a pension which will attract this tax relief.
If you pay tax at the higher rate of 40% then for every €1,000 you pay into a pension plan you could potentially reduce your tax bill by €400.
Another big advantage is that if you make the pension contribution before the 31st October 2019 deadline you can backdate the relief to help reduce your 2018 tax bill.
2. Claim relief for your employer paying medical insurance on your behalf
If you pay medical insurance directly to a provider, then do not need to claim the tax relief from Revenue as the relief is given as a discount on the cost of the policy.
However, if your employer pays medical insurance for you or your family on your behalf then you may be entitled to an additional tax credit in your tax return.
To claim the relief you will need to provide the following information on your tax return:
- the date the policy started
- who is covered on the policy and their ages
- a breakdown of the cost of the policy for each person
- the amount paid by your employer
3. Claim the Home Carer Tax Credit
A Home Carer Tax Credit is a tax credit given to married couples or civil partners who are jointly assessed for tax, where one spouse or civil partner works in the home caring for a dependent person.
A dependent person is a:
- Child for whom Child Benefit is payable
- Person aged 65 or over
- Person with a disability who requires care
The Home Carer credit could potentially reduce your tax bill by a straight €1,200 for 2018. To be eligible for full relief, the home carer must not earn more than €7,200 a year (although they can earn up to €10,200 and still get some relief), while the other partner may be better off benefitting from the higher cut-off point for the standard rate of tax, depending on their earnings.
4. Claim the Year of Marriage Tax Credit
If you got married during 2018 you may be entitled to claim the Year of Marriage Tax Credit.
You will continue to be taxed as two single people in 2018.
You may however qualify for a refund. You qualify if you pay more tax for the year, as two single people, than you would if you had been taxed as a married couple. If you are due a refund, it will only be given for the portion of the year that you were married.
For example, if individually you both paid €10,000 each i.e. €20,000 in total in tax in 2018 but your tax bill as a married couple would be €16,000 in total, then you can claim some or all of the difference of €4,000 owed to you depending on how long in 2018 you were married for e.g. if you were married for 6 months in 2018 you would get €2,000 relief.
5. Claim Income Continuance tax relief
A lot of people know they can save money by paying into a pension but far fewer know that contributions to an income continuance scheme, or income protection scheme as they are more commonly known, may also be eligible for tax relief.
The relief you can claim is limited to 10% of your total income for the tax year.
The good news in relation to all of the above reliefs, or indeed any reliefs that you may be due, is that if you were entitled to them but never claimed them you can review your last 4 years tax returns and trigger any refunds that may be due to you. It could potentially be a nice little bonus coming up to Christmas!
Talk to a Professional
You should talk to your accountant about how you can claim these credits or others that you may be entitled to. By working with a professional it ensures you get everything right on your tax return and you are making the best savings available to you.
At TaxAssist Accountants we have worked with thousands of individuals across Ireland on their tax returns. If you need assistance filing your income tax return you can call us on 1800 98 76 09 or submit an enquiry online
to book your free initial consultation.
By Michael Scanlan
Last updated October 2019