One of the best, and most lucrative, ways to get tax back is to invest in a pension plan.
What are the best ways to invest in your future and get lots of tax back? See our quick guide below and if you need to talk to an expert, talk to a tax expert.
Contributions to a Revenue-approved PRSA or personal pension plan can give tax relief on your income tax (but unfortunately not on your USC or your PRSI) up to an annual limit related to your age and net earnings in the tax year. Net relevant earnings exclude certain charges on income and capital allowances.
Below the age of 30, the maximum contribution allowable is 15% of net relevant earnings, rising to 40% of net relevant earnings for contributions made when you are 60 or over. There is a further restriction on the amount of net relevant earnings that may be taken into account for tax relief purposes.
Lots of tax back
Tax relief reduces the net cost of investing in a pension plan. For example, the net cost of a €10,000 pension contribution made by a higher rate (41%) taxpayer, is €10,000 X (1-.0.41) = €5,900. That’s a lot of money saved.
Pension schemes and a lot of tax back
Here’s how the contributions to occupational pension schemes and AVCs are treated for tax purposes.
1: Any contribution made by the employer to the scheme is not treated as a benefit in kind for the employee concerned.
2: Any personal contributions made by the employee are deductible for income tax purposes (but not for USC or PRSI purposes) within limits. That is, a maximum contribution of 40% of pay for an employee aged 60 and over. Again, there is a limit on the amount of pay that can be taken into account for tax relief purposes (€115,000 in 2015).