Financial Wellbeing and literacy expert Frank Conway from MoneyWhizz reveals the many tax reliefs people are entitled to claim back on.
While it can be fashionable to complain about how much tax we all pay, not enough people fully understand how to claim back the taxes they are owed!
With changes under the PAYE modernisation programme now fully in place, it will be easier to deduct and pay the correct tax at the right time, this includes:
- Income Tax
- Pay Related Social Insurance
- Universal Social Charge
- Local Property Tax
- It will also be easier to file and claim for tax relief owed
There are varying estimates as to the value in unclaimed tax across Ireland each year. Some estimates put the value to be hundreds of millions of Euros. But regardless of what it is, there are many tax payers that have never filed any claim with Revenue, even where they are owed money.
Following is a list of common ways people can pay the correct level of tax based on their current situation and how tax relief applies:
Not adjusting tax after getting married
For those that get married or enter into civil partnerships, it is important they notify Revenue of the change. You will continue to be taxed as two single people in the first year. You may 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 jointly assessed. If you are due a refund, it will only be given from the date of marriage or registration of civil partnership. You can claim the refund of the difference after 31 December of the year. Refunds are repaid to each person in proportion to the amount of tax each of them paid.
Tom & Mary married on 10 July 2018. They continue to be taxed as single people in 2018.
As single people they pay a total of €10,640 in income tax for the year. Tom paid €9,140 and Mary paid €1,500.
If they had been jointly assessed, they would have paid €8,840.
The difference between the two amounts is €1,800
As they were married for six months of the year, a refund of €900 is available (€1,800 X 6/12).
Once you’re married or are civil partners, you can share tax credits and have more of your income taxed at the lower rate, which can boost your take-home bay if you file as jointly assessed.
Whether it will benefit you typically depends on how much you both earn. It is often of most benefit when only one partner is working.
So do the maths before making the decision. But remember: if your circumstances change, such as one partner no longer working, it is possible to then readjust your tax credits.
Health insurance tax relief
- Medical insurance premiums – if you pay medical insurance directly to an approved insurer, tax relief is available.
- Qualifying medical insurance policies can be for:
- health insurance
- dental insurance
- health and dental insurance combined
In most situations, you do not need to claim the tax relief from Revenue….but there are some exceptions. The relief is given as a discount on the cost of the policy. The relief is known as tax relief at source (TRS). The discount is given when you pay the cost of the policy, regardless of who the policy is for.
If the premium is deducted from your pay or pension and paid over to the insurer, the discount should still be applied.
The relief is provided at the standard rate limited to the cost of the policy up to:
a maximum of €1,000 per adult (equal to a credit of up to €200)
€500 per child (equal to a credit of up to €100). For the purposes of this relief, a child is any individual under 21 years of age. Policies paid by employers (as a Benefit-in-Kind)
Your employer might pay medical insurance to an approved insurer for you or your dependents as a benefit-in-kind. If so, you can claim tax relief from Revenue for the premiums paid. You can also claim for payments for your spouse or civil partner.
You can claim the credit on the Form 12 if your employer pays medical insurance for you or any of your dependents. You must provide the following information:
- 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
If your employer only pays a percentage of your policy cost the relief you can claim is restricted to that percentage. This is because the portion of the policy you pay yourself directly will have been discounted.
Not claiming flat rate expenses
Flat-rate expenses have been around for a long time and there are ongoing discussions about reform but for now, the existing relief’s are maintained. But first, here is how flat-rate expenses currently work.
The expenses relief is for employees. It is tax back compensation for expenses certain employees are paying, for example for buying and laundering their own uniforms (like nurses, shop assistant, hotel and hospital staff, pilot, steward, physiotherapist, pharmacist, optician etc.) or buying tools (like carpenter, plumber, motor mechanic etc.).
Self-employed people are doing their accounts themselves, so they can reduce their gross income with anything they are considering to be business expense for example telephone, work clothes, tools, PC, home office, travel etc. That’s the advantage to be self-employed. Employees don’t have this “freedom”. That’s why Revenue is trying to compensate this through flat rate expenses tax relief for general workers.
The list of professions and the flat-rates that apply is really extensive.
How to claim Flat rate expenses
There is no need to keep receipts to claim this relief and there is no form available for claiming this relief. You can claim this relief 4 years back.
You can claim through the MyAccount facility on Revenue.ie:
- sign into myAccount.
- click on ‘Review Your Tax’ link in PAYE Services.
- select Income Tax Return for the year you wish to claim for.
- in the ‘Tax Credits & Reliefs’ page, select ‘Your Job-Flat Rate Expenses‘ and add it as a credit.
- complete and submit the form
PAYE Employees – Flat rate expenses table (example)
|Real tax refund/saving||Amount reducing gross income|
|Profession/Occupation||40% higher tax rate||20% standard tax rate||2016 – 2020|
|Agricultural Advisers (employed by Teagasc)||€ 268||€ 134||€ 671|
|Archaeologists: (Civil Service)||€ 51||€ 25||€ 127|
|Architects employed by|
|(a) Civil Service||€ 51||€ 25||€ 127|
|(b) Local Authorities||€ 51||€ 25||€ 127|
|Airline Cabin Crews||€ 26||€ 13||€ 64|
To see if your profession qualifies for such a deduction and the full list of reliefs, go to the Revenue website HERE
Not claiming back DIRT
If you or your spouse recently turned 65 and are within certain income limits, you shouldn’t be paying DIRT on any income earned on deposits. This means that you could be due a refund.
You may be due a refund because:
- you are now over 65 years of age
- your income went temporarily over the exemption limit
- you have become incapacitated
- it is the first year that you successfully applied for a DIRT exemption, but the financial institution had already deducted DIRT.
- If this is the case, you should complete a Form 54D Claims and send it to your Revenue Office. If they accept your claim, they will issue the refund
Staying at home – but forgetting the 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.
The tax you are liable to pay is calculated as a percentage of your income. A tax credit is deducted from this to give the actual amount of tax that you have to pay. A tax credit has the effect of reducing your payable tax by the amount of the credit.
A full Home Carer Tax Credit can be claimed when:
- The married couple or civil partners are jointly assessed for tax
- One spouse or civil partner works in the home caring for one or more dependent people
- The home carer’s own income is under €7,200. A reduced tax credit applies if the carer’s income is between €7,200 and €10,400.
Check on Revenue.ie or Citizens Information on how the new credits apply in 2019.
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 Tax Credit for 2020 is €1,600.
If the home carer has an income of up to €7,200 in their own right for the tax year, the full tax credit may be claimed.
Reduced tax credit
However, if the income exceeds €7,200, the difference between the actual income and €7,200 is calculated and then halved. The Home Carer Tax Credit is then reduced by that amount. The following table gives examples of how the tax credit is calculated for different levels of income.
If the home carer’s income is €10,400 or more during 2020 then you cannot claim the tax credit.
Don’t pay full price for your work commute
If you use the bus, Luas or rail services to get to work every day, you could significantly save on your costs by buying a taxsaver commuter ticket through your employer. This can help allay the increasing cost of transport.
Under the scheme, you are entitled to receive annual, monthly and part-yearly commuter tickets free of tax and PRSI as part of your salary package. The only caveat is that to claim tax relief, the ticket must be purchased through your employer. The savings are significant, especially given the increases in the overall tax burden due to the universal social charge.
To illustrate how this works, assume that the annual cost of a bus/rail ticket is €1,040 and that an employee is earning €20,000 per annum. Instead of the employee buying the ticket him or herself for €1,040, the employee agrees with the employer a salary sacrifice of €20 per week for the cost of the annual ticket. (This equates to €1,040 for the year in which the employer pays for the ticket.) The employee will not be charged to tax/PRSI/USC on the portion of salary sacrificed; therefore, tax, PRSI and USC are now calculated on the employee’s salary minus the salary sacrificed (€18,860) – Source: Revenue.
Applying for the scheme
Employees choose the TaxSaver commuter ticket that best suits their needs, bearing in mind that commuter tickets can be used outside office hours and for leisure purposes.
The employer and employees sign a contract, subject to the rules of the scheme.
The employer applies the required Tax Conditions and registers with the public transport provider.
The employer makes a group application on behalf of employees by post, e-mail or online.
Companies must keep a receipt of purchases and a copy of the ticket for their tax records.
Information on where to apply is available from the following websites:
If you let a room in your home, the income you receive may be exempt from tax.
The income you receive must not exceed the exemption limit. If it does then you are taxed on the total amount. It can only be claimed by individual taxpayers.
The annual exemption for the relief is €14,000 (since 2018)
You must use the Revenue Online Service (ROS) to enter the amount of exempt income on your Form 11 if you are self-assessed. You must use myAccount to enter the amount of exempt income on your Form 12 if you pay tax through the Pay As You Earn (PAYE) system. You will then receive the relief due.
If you do not wish to receive this relief you can request to have the income taxed. You must request this in writing on or before your tax return’s filing date.
There is a four year time limit to claim relief. This is important if you were paying tax all along on your rental income which should have been exempt.
Plus, remember, you cannot claim the relief against income received for the use of the room(s) from:
- your child or civil partner
- an employer
- an employee
- short-term guests, including those who book accommodation through online booking sites.
- The relief can apply to lettings used as residential accommodation for students in an academic year or term
Tax relief on education expenses
The maximum amount of fees (including the Student Contribution) that can qualify for tax relief is €7,000 per person per course. Full-time student: There is no tax relief on the first €3,000 spent on tuition fees (including the Student Contribution) for the 2018/2019 academic year.
You cannot claim relief for fees that are funded by:
- your employer
You may be the student, or you may pay the fees on the student’s behalf. You can claim the relief if you have actually paid the fees.
No relief is available for:
- examination fees
- registration fees
- administration fees.
How do you calculate the relief?
You will receive relief at the standard rate of tax, which is 20pc. This is applied to the total qualifying fees once the disregard amount has been subtracted.
Frank Conway collaborates with Bank of Ireland on Financial Wellbeing and promoting financial literacy. He is a qualified financial adviser, founder of MoneyWhizz and chair of the Price Monitoring Group at the Department of Communications, Climate Action and Environment.