PAYE Relief on Pension Contributions

Due to some screw ups/administration problems between my employer/pensions broker etc, my pension contributions for this year have not been coming out on a monthly basis during the year, and so are set to all pay in a single payment.

I can choose when to pay this though - i.e. this year or next.

This year I will only be marginally into the upper tax bracket when I add up all salary paid through revenue from Jan-Dec '09. Next year I will be well into it.

The amount that I am into the upper bracket is less than the amount that will be paid to the pension (gross).

Does the full amount still qualify for the upper rate of relief?

Also, are PRSI and the Income Levy removed also? i.e if €100 off my Gross salary goes into the pension, am I only down by €51 net? (i.e. 41% PAYE, 6%PRSI/health, 2%Levy); or is it only the PAYE which is relieved on this?

The maximum amount you can get higher-rate tax relief is the amount of your income on which you're paying tax at the higher rate. So if €13,000 of your year's income is taxable at 41%, the maximum contribution that will be relievable at 41% is €13,000, assuming that €13,000 is within your age-related limit for tax relief.

Hope this helps.

Liam D. Ferguson

Thanks. That helps a lot with the decision.

And I've actually thought further on this and due to the dates on which i've received pay in this year, i will actually be under the upper tax bracket - just.

I was also considering whether to put it through in this tax year in case the budget changes this relief to the lower rate next year - however, now even if it does, I'll not be any better off submitting it this year or next year.

Quoi? said:

Also, are PRSI and the Income Levy removed also? i.e if €100 off my Gross salary goes into the pension, am I only down by €51 net? (i.e. 41% PAYE, 6%PRSI/health, 2%Levy); or is it only the PAYE which is relieved on this?

Click to expand...

Can you answer this for me? This question applies whether its at the higher or lower rate of relief.

PRSI is calculated on earnings net of pension contribution.