How is tax relief applied for Personal Pension Contributions?

Hi there,

Started up my personal pension a couple of years ago, Sent in the relevant RACs and the revenue adjusted my tax credits accordingly. I would be entitled upto 20% relief due to my age bracket. Looking at my most recent tax cert, I'm confused as to how I'm getting the available tax relief?

For example, say I contribute €1000 per month to the pension, which would still be under the 20% threshold, what would be on the tax cert?

The revenue has €6000 @20%=€1200 tax credit, but the €6K figure has no reflection on my monthly premium of €1K. Thus the confusion?

Thanks for any insight.

S.

PS: (Mods feel free to move to the pension forum if more applicable).

Pension relief is always at your top rate of tax. So if your are a top rate payer, then the relief is at 42%. When I was PAYE and sorting out my own pension, I would normally fill in a form 12, stating my pension contribution on it, after which the revenue would send me a cheque. For example I paid 5000, so the revenue sent me a cheque for 2100. (I think PRSI has no relevance)

Suzie,
I think if you look at the opposite side of your cert there is an credit allowed at the full amount contributed. The net effect is to give tax relief at the marginal rate of tax. This will only give relief in the current tax year. Previous tax years you should get a cheque from revenue.

Can you not arrange to have you pension deducted direct from payroll every month.

PRSI relief is available provided the pension contributions brings your gross salary below the PRSI treshholds, you are entitles to the 2% health contributions relief anyway. When you receive your tax refund you they apply to the Dept of Social Welfare (or whatever name it is now - Seamus Brennan's Dept)

Yeah - it's a bit confusing to be honest (to me anyway). As asdfg says They extend your standard rate band by the amount of your pension contributions and also give you a standard rated tax credit. The net effect of this is that the pension contributions are nominally taxable at 20% but then the tax credit cancels out the tax due leaving the pension contributions (up to your age related limit of course) tax free. If you are not already getting PRSI relief then you will need to claim it separately - see this thread.

Thanks Clubman and all,

Now I see how they do it. Good thing for me is that it looks like I'm due money I'll also need to chase the PRSI stuff.

S.