If you are looking at ways to reduce your tax bill Susan O'Mara of Milestone Advisory may have the answer for you. Read Susan's article below for some tips.
It’s that time of the year again when financial advisers and accountants are focussed on ensuring their clients maximise the tax reliefs available through pension savings. If you work in the Construction Sector and are either a company director, self-employed or an employee, I’m talking to you!
Why is there a specific time of the year?
If you have any unclaimed pension tax relief for 2017, it must be claimed before either the 31st October 2018 or 14th November 2018 if you use ROS the Revenue Online System to pay and file.
I am self-employed – how does this benefit me?
If you are self-employed, you will have to calculate your tax liability in respect of
- Final tax assessment for 2017;
- Preliminary tax for 2018
You can reduce your final tax liability for 2017, as well as reduce your 2018 preliminary tax liability by contributing to a pension by 31st October 2018 or 14th of November 2018 as outlined above.
I am a Company Director – what’s in it for me?
If you are a Proprietary Director, you must also file self-assessed tax returns by 31st October, even if all of your income is taxed under the PAYE system. If your income includes non-PAYE income, you must pay any balance of Income Tax outstanding from the previous year and you should now consider paying preliminary tax for the current year.
Once again, a pension contribution can reduce the total tax due for 2017 if a lump sum is made by 31/10/2018 (or 14/11/2018 if you pay online). The maximum you can pay is a percentage of salary, based on your age and this is subject to an earnings cap of €115,000 (see table below).
I am an Employee – how does this work for me?
Of course - while PAYE employees do not have the pay and file deadline, the 31st October / 14th November is a good opportunity to maximise your Pension contributions for the previous year if you have not already done so. Furthermore, if you are an employee and also perhaps an “accidental landlord” you may have a tax return to make – and it may be advantageous to use the same tax efficiencies the self-employed use to reduce their tax bill.
What tax relief is actually available?
Tax relief is available as follows:
What does this mean in plain English?
The table below shows the tax relief available at both tax bands and the cost of a pension contribution of €1,000 invested in your name.
You will see, at the higher tax rate that if you invest €1,000 in a pension, it will only cost you €600. On any day of the week, if someone offered to sell you €1,000 for a price of €600 – you would take that deal in a second.
Is tax relief the only advantage?
Well NO. Of course not. While you are busy saving tax – a fortunate by-product is that you are also saving for your own retirement and the benefits of this include peace of mind when you retire, additional income above the state pension and a whole host of others I will write about again.
If you think that any of this tax relief is of interest to you give me a call today. For further information please contact Susan O’Mara at: firstname.lastname@example.org or phone: 01-4068020
Milestone Advisory DAC t/a Milestone Advisory is regulated by the Central Bank of Ireland.