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The Financial Column

Welcome to the Financial Column in association with Money Plus, the award winning Financial Services company on Bridge St., in Boyle.

Q. I am a self-employed retailer. My accountant is in the process of completing my accounts and has indicated that my tax bill is going to increase. He has suggested that I reduce this by making a lump sum pension contribution. I am currently already paying €200 a month to my pension. What additional tax relief, if any, can I get, through making a one-off contribution?

A. Your query is very timely. This is the time of year when self-employed people are getting their accounts finalised and submitting their tax returns based on their profit for 2015 and preliminary payment for 2016.

As your accountant has suggested – one of the best ways to reduce or eliminate your tax bill for 2015 is to maximise the tax relief available by paying into your pension. The maximum pension contribution, in any one year, is related to your age and is expressed as a percentage of your gross income or profit. The maximum gross income for tax relief purposes is €115,000.

As you are already paying €2,400 per annum to your personal pension through your monthly contributions you will need to take this into account when calculating the maximum one-off pension contribution which you can make, based on the table below.

If you are a higher rate tax payer you will get tax relief at 40%, or 20% if you are a standard rate tax payer, on the total amount (Monthly + one off contributions) you pay into your pension as a percentage of your earnings below.

Tax Relief by Age Bracket
Under 30:      30 to 39:      40 to 49:      50 to 54:      55 to 59:      60 and over :
15%             20%               25%              30%               35%                 40%

The Revenue Pay and File deadline is 31st October, or 10th November is you file online – to avail of the tax relief for 2014 you must make your pension contribution before the relevant deadline.

For advice on minimising your tax bill for 2015 using pension contributions and retirement planning please consult Belinda McCauley at Money Plus, your local independent financial broker. Belinda and her colleagues at Money Plus, Bridge St, Boyle would be delighted to help you. Belinda can be contacted at 071-9194000/086-7847827 or by email: [email protected].

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