Welcome to the Financial Column in association with Money Plus, Bridge Street, Boyle.
Q. I have a preliminary tax bill to pay by the end of the month. My accountant has advised me to take out a pension to reduce the amount of tax I will have to pay. How does this work and what do I have to do ?
A. I’m presuming that you are a self-employed, sole trader. As your accountant has advised, the best way to reduce or eliminate your tax bill for 2014 is to pay into a pension and maximise the tax relief available.
How this works is that you set up a personal pension plan with one of the main providers such as Zurich Life, Aviva, Standard Life etc. and make pension contributions, either by way of a one-off lump sum contribution or by regular pension contributions, or a combination of both.
You will then receive full tax relief at your marginal tax rate, either at 20% or 40%, on your pension contributions, up to a maximum annual limit, based on your age. This is expressed as a percentage of your gross earned income or profit.
The table below shows the maximum percentage of your income on which you can receive tax relief. The maximum income or net relevant earnings for tax relief purposes on pension contributions is €115,000.
Maximum Tax relief for pension contributions by age and earnings :
Under 30: 30 to 39: 40-49 50-54 55-69 70 and over
Up to 15% of earned income Up to 20% Up to 25% Up to 30% Up to 35% Up to 40%
The Revenue Pay and File deadline is 31st October, or 12th November is you file online – to avail of the tax relief for 2014 you must make your pension contribution before the relevant deadline.
For further information and advice on minimising your tax bill using pension contributions please contact Belinda at Money Plus on 071-9194000 or by email : [email protected].
If you have any financial questions you would like answered in this column please submit details in confidence to [email protected]
Money Plus are experienced investment and financial brokers and have been in the business of financial and investment planning for many years. They are dedicated in providing bespoke financial planning advice to clients. If you would like further advice on the above or any other financial information please contact Belinda McCauley in our Boyle office on Bridge Street on 071 9194000 or [email protected]
Boyletoday.com/MoneyPlus accept no responsibility for any decisions taken as a result of advice provided in this column. A reliable recommendation can only be made following a full detailed consultation taking an individual particular circumstances into consideration
