Pension Scheme

Q. I have just been informed of my Income Tax Bill for 2015 and it is higher than I expected. Is there any mechanism to reduce this now?

4th November 2016

One method to look at reducing your tax bill at this late stage would be a qualifying contribution to a pension scheme.

Pensions are a great way to save for your retirement with the added bonus of being tax-efficient. When you pay into a pension scheme the net cost to you is lower than you would initially think as the Government provide tax relief at your highest rate of tax. This tax relief is available to employees, self-employed and company owner / directors.

Revenue allow pension contributions made to October 31 2016,  or to November 10 2016 where online returns are filed and paid in full by this date, to count in calculating your 2015 tax liability.

The maximum amounts on which tax relief may be claimed depend on your age and Net Relevant Earnings. The rates are as follows:

 

Age

Maximum contribution (% Net Relevant Earnings)

Up to 30 years

15%

30 but less than 40

20%

40 but less than 50

25%

50 but less than 55

30%

55 but less than 60

35%

60 years or over

40%

 

The maximum Net Relevant Earnings considered for tax relief is capped at €115,000.

As an example, take an employee aged 37 on a salary of €45,000. The maximum pension contribution is 20% of the taxable salary or €9,000. If the employee maximises this contribution it would offer a tax saving of €3,600 

For the self-employed person aged 54 with business profits of €80,000 the maximum pension contribution is 30% of Net Relevant Earnings or €24,000. If the pension contribution is maximised it would offer a tax saving of €9,600.

 

 

Disclaimer: Advice shared in this blog is intended to inform rather than advise. Taxpayer's circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this forum, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.

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Call us today to make an appointment at your local office

1890 98 76 09

Or submit an enquiry