AVC Query - does the AVC limited apply to gross or net income?

T

tcab23

New Member
Messages
8
Apologies if this has been answered but can someone advise if the AVC limit applies to gross or net income.

I currently qualify for the 25% AVC limit and trying to determine how much AVC I can pay.

Annual Gross is 119k (124k from July)
Employer contributes 6%
Employee contributes 6%
AVC - 500 EUROS/month; doubled to 1000 to commence July

I am trying to understand if I can add more AVC and what % I am currently at in terms of reaching the 25% limit.

Also, is it as simple in saying that a 1000 AVC costs me 600 euros from net income. I based this on for every 100 euros you get 40 euros relief.
 
There is no limit on the amount you pay but only a limit on the amount for which you can claim tax relief

Tax relief is limited to 25% of your gross salary and this is explained in the Revenue web site

Contributions paid to a PRSA for AVC purposes​

Tax relief for PRSA AVCs is based on the appropriate age-related percentage limit of the income from the employment in question. (As reduced by any employee contributions to the pension scheme relating to the employment).
Click to expand...
 
It's gross income. Only complication is that the tax relief limit is 25% up to a maximum of €115,000 salary, and your salary exceeds that.

For 2023, your calculations would look like this...

  • First six months: employee contribution €119,000 x 6% / 2 = €3,570
  • Second six months: employee contribution €124,000 x 6% / 2 = €3,720
  • Maximum allowable for year - assumes your in your 40s: €115,000 x 25% = €28,750
  • Scope for AVCs: €28,750 - €3,570 - €3,720 = €21,460
 
tcab23 said:
Also, is it as simple in saying that a 1000 AVC costs me 600 euros from net income.
Click to expand...

Yes. It only gets complicated if your salary is only marginally over the €40,000 band for the 40% tax rate and your AVC effectively drags you back into the 20% band. In that case, only some of your AVC would be relieved at 40%. But you're well into 40% so it's 40% relief all the way.
 
LDFerguson said:
It's gross income. Only complication is that the tax relief limit is 25% up to a maximum of €115,000 salary, and your salary exceeds that.

For 2023, your calculations would look like this...

  • First six months: employee contribution €119,000 x 6% / 2 = €3,570
  • Second six months: employee contribution €124,000 x 6% / 2 = €3,720
  • Maximum allowable for year - assumes your in your 40s: €115,000 x 25% = €28,750
  • Scope for AVCs: €28,750 - €3,570 - €3,720 = €21,460
Click to expand...
Does employer contribution not count? If it does then my 1000 AVC is nearing the max as it leaves approx 14000k per year and Im adding 12k in AVC
 
LDFerguson said:
No. Employer contributions aren't counted for these calculations.
Click to expand...
Ok so even more room to increase. I guess the easy way to calculate this without converting the percentages is to subtract my employee contribution of 6% from the 25% limit and therefore I can make AVC of 19% of 115k (max gross salary for relief purposes) Works out 1820 per month max AVC

Most of my spare cash is going towards AVC and mortgage overpayment versus actual heavy saving. Some savings are been made but less than the AVCs for sure. Thanks all for the feedback.
 
You must log in or register to reply here.
Back
Top