Can I claim tax relief for contributions from 2020 income to a pension I will start in 2021?

[JMG]

Hello everyone.

I started a new job in August 2020, working as a contractor. I have not yet setup a pension, and given how late in the year it now is, I expect it will probably be 2021 before I get one setup (probably a PRSA). My question is: if I don't start my pension until 2021 can I still claim relief against 2020 income for contributions I make to the pension while also claiming the full relief allowed for my age for contributions made from 2021 income? Or, must I have started the pension in 2020 in order to claim relief against 2020 tax?
To hopefully make my question clearer: for my age , under Revenue rules I can claim tax relief on up to 30% of income. My plan is to pay 30% of my 2020 income into the pension and also 30% of my 2021 income. If I only start the pension in 2021, can I claim tax relief on both payments, against 2020 tax for the 30% of 2020 income paid and against 2021 tax for the 30% of 2021 income paid?

Also, I'm hoping to be made a permanent employee by the company sometime in 2021 and if that happened I would join the company DC pension scheme. If I did that I assume the income I earned in 2020 and in 2021 (as a contractor) could not be considered for tax relief purposes in regards to any contributions I make to the company DC scheme? Assuming the answer to this question is no, could I start a PRSA after becoming a permanent employee, the reason for doing so being to claim pension tax relief on my income as a contractor (obviously I would pay into PRSA based on revenue limits against my 2020 and 2021 contractor income.

Hopefully all of that makes sense. Thanks for any help offered.

 

[Paul O Mahoney]

Ill stand corrected but I think you can only claim what you have paid in the applicable year.
So, you won't be able to claim relief for 2020 if you have paid nothing.

 

[bstop]

If you make a pension payment before 31 October 2021 you can claim tax relief for tax year 2020. There is a line on the tax return form to allow for this option.

 

[Paul O Mahoney]

If you make a pension payment before 31 October 2021 you can claim tax relief for tax year 2020. There is a line on the tax return form to allow for this option.

Really.......I did notice a line on the Form 11 but as any Avcs outside of payroll I didn't dig into it.
Thanks

 

[Paul O Mahoney]

You may pay a once-off or special pension contribution after the end of a tax year, but before the following 31 October. If you do, you can choose, on or before 31 October, to have the tax relief for the contributions allowed in the earlier tax year. When you use the Revenue Online Service (ROS), the deadlines for paying contributions and making this choice are extended.

from Revenue website.

 

[JMG]

Thanks Paul and bstop for your replies, I appreciate it. However I think you are missing the point of my question - no doubt because I have not stated it very clearly. I know I can make contributions in the current calendar year ( before 31 Oct) that can be used to get tax relief on tax paid in the previous calendar year. My question is if that still holds true even if I don't start the pension unto the current calendar year (before 31 Oct) ?

 

[asdfg]

You can set up and start your pension in 2021 and offset your pension contributions up to the limits allowed by revenue against all your tax paid in 2020 provided contributions are made before end of October 2021.
Have a look at your final payslip in December, make sure all credits are allowed and you are not on a week 1 month 1 basis, see how much tax you paid cumulatively and make a pension contributions so that the tax paid is reduced or cleared.
Did you work prior to August in 2020 or did you receive any covid payments from welfare?

 

[JMG]

Thanks asdfg, I appreciate your reply.

I did work prior to 2020, until Oct 2019, PAYE employee and I paid into a company DC scheme. I was made redundant in Oct 2019 and I decided to take some time out between Nov 2019 and Aug 2020. Did not receive Covid payments but I did receive the normal social welfare jobseekers allowance payments for some of the months I was out of work.

In my current job, the company does not pay into pension scheme, they do provide access to an Irish Life financial adviser who will help you set up a PRSA if you want to do that. However I neglected to set one up and I think it is too late to get one setup now in 2020 (and I don't want to have to rush it) so I expect I will not have one setup until early 2021.

What is a "week 1 month 1" basis and how would I tell from my payslip if I am on that? If I was, what difference would that make?

Thanks again.









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[asdfg]

Sometimes when you owe revenue money they put you on a week 1 month 1 basis. This means that tax is calculated every week or month with no credits allowed for the months you were not working ( you are allowed a number of credits per annum and these are given to you on a weekly or monthly basis) and it is noted on your payslip. If it says cumulative then your back credits are allowed.
The sw payments are taxable.
I think the easiest thing for you at this stage would be to request a balancing statement from revenue in the new year. This can also be done online. Have a look at 2019. You may also be due some tax refund if you haven't already claimed it back.

 

[JMG]

Thank you again asdfg, I really do appreciate the time you are taking to give me this information.

I am pretty sure I don't owe Revenue anything. I did pay tax on the SW payments - I say this because the amended Tax Credit Certificate Revenue issued for 2020 (issued after I started my new job) shows that my tax credits were reduced due to the SW payments I received.

Thanks also for the note regarding 2019 tax - I have already claimed (and received) a tax refund for 2019 when I submitted my returns for 2019.
I'll request balancing statement in Jan for 2020 as you suggest, but I'm pretty sure I'm OK and can start the pension in 2021 and then claim against 2020 tax for a one of contribution that I'll make before Oct 2021.