# 4 year plan: tax relief reduction commences when?



## noodles (4 Dec 2010)

Probably a very basic question and I will call my PRSA provider on this but... if I haven't maxed out my eligible PRSA contributions for 2010 yet, can this be done via lump sum payment in December? (I'm a self employed company director).
Or in other words, am I correct in thinking that 
1.  Tax relief is based on Jan-Dec tax year/total contributions per calendar year
and 
2.  Tax relief on PRSA contributions will be reduced from beginning of Jan 2011, or if it is reduced via finance bill later in 2011 will the reduction be retroactive or from a date after the finance bill is passed?

Hope the question makes sense!

Thanks folks.


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## Copper Beach (4 Dec 2010)

AFAIK and it is only my guess that as a Self Employed person , you will have up until the filing date for yr 2010 Income Tax Return .i.e. 31st Oct 2011 to make an additional personal contribution but I do remember some years ago they brought in a restriction on company contributions which can only be made before 31 Dec2010 in respect of the Tax Year 2010.  Would be interested to know if this still applies.


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## noodles (5 Dec 2010)

Thanks Copper Beach.  
I'll verify with my accountant but will put some cash aside for this.  I know a lot of people are skeptical about the pensions industry but I think the tax relief on these is good deal and funds go up as well as down over the long term.  I know that I'll be taxed on it at the other end, but it's a better plan than gambling on the state being able to provide!


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## GSheehy (5 Dec 2010)

It is not a racing certainty that the current tax-relief system will be reduced at all. IMHO the €700m that the Government 'need' to collect from this austerity measure will be in the form of a levy on pension funds.

It probably depends on who is in Government next year.


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## TheFatMan (6 Dec 2010)

GSheedy? The 4 year plan clearly states the reliefs will be reduced.
You think they were kidding the IMF?


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## GSheehy (6 Dec 2010)

It states :



> Over the following 3 years of the Plan the rate of income tax relief on pension contributions will be reduced from 41% to 34% in 2012, to 27% in 2013 and 20% in 2014.


 




> However, the Government is committed to raising €700 million from this sector over the period of the Plan and is willing to engage with the industry to examine alternatives to deliver this outcome.


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## squaw (7 Dec 2010)

Is the 20% tax relief rate not coming in straight away?
I have to say that I cannot see the reasoning behind all this. 
What is the point in saving into a Pension at 20% when you might be paying tax on it when you draw it down at a rate that will probably considerable higher.

Also so you know if the PRSI and HL exemption applies to the portion that the ER pays in.

Again taking away the PRSI and HL Incentive also makes me question whether I will bother continue saving for my pension.

I thought the gov wanted more people to save for their own pensions?


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## LDFerguson (8 Dec 2010)

No reduction on tax relief on pension contributions in yesterday's Budget.  As GSheehy said, this may not happen.  There were reductions on Employer PRSI relief on employee pension contributions and the Employee PRSI / Health Levy relief on pension contributions is being withdrawn from next year.


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## Wren100 (8 Dec 2010)

Sorry, I'm sure this sounds like an incredibly stupid question, but has tax relief on AVC contributions actually been abolished or merely reduced?  As far as I can see, it's been reduced, but I'd just like to make sure.


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## LDFerguson (8 Dec 2010)

Wren100 said:


> Sorry, I'm sure this sounds like an incredibly stupid question, but has tax relief on AVC contributions actually been abolished or merely reduced? As far as I can see, it's been reduced, but I'd just like to make sure.


 
Neither.  Tax relief is still available at your highest rate on AVCs, so if you're a 41% taxpayer, you'll get 41% relief and 20% if you're a 20% taxpayer.  The four-year plan _proposed_ reductions to this but it's open to negotiation as to whether or not these proposals will actually be put into place.  

Yesterday's Budget did abolish PRSI and Levy relief on AVCs though.


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## Wren100 (8 Dec 2010)

Thanks LD.  I pay pretty heavily into an AVC and thought I was down for a very severe kicking.  As it transpires, it's only a moderate one - for now, anyway.


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