Potential tax liability with avc / layoff

[delta_bravo]

Hi,

I'm in my 30s, in previous years I have done manual avcs as a way to get tax refunds. I pay the higher rate of tax. This year I decided to forego the hassle and just pay the max monthly contribution from payroll in work. However a slightly pessimistic thought came to my head, my employer has begun several rounds of layoffs.

What if for the first few months of the year I am paying max avcs and then get laid off before I cross the higher rate threshold. If I wasn't to work again that year, could I potentially have a significant tax liability by getting too much tax relief?

 

[ClubMan]

What if for the first few months of the year I am paying max avcs and then get laid off before I cross the higher rate threshold. If I wasn't to work again that year, could I potentially have a significant tax liability by getting too much tax relief?

How do you think that that could happen?
If you're paying the maximum age related tax relief amount on a pro-rata monthly basis how do you think that you could end up exceeding the tax relief amount for your total earnings in a year where you get laid off?

 

[moneymakeover]

You should be fine if you are paying part of your salary each month.

You're not paying in advance for entire calendar year right?

 

[bish123]

As you said, it's monthly maximum settled every month out of salary. In worse case of any layoff, contributions will also stop.

 

[delta_bravo]

How do you think that that could happen?
If you're paying the maximum age related tax relief amount on a pro-rata monthly basis how do you think that you could end up exceeding the tax relief amount for your total earnings in a year where you get laid off?

Perhaps I have this completely wrong. But my thinking was that say for the first three months of the year you gross 5k and pay your avcs on that basis. Then you get laid off and don't work again all year. Your avc relief was at 40% but you don't reach the higher rate so would only be due the 20% relief.

Judging by your and other replies I don't need to worry about this!

 

[ClubMan]

Perhaps I have this completely wrong. But my thinking was that say for the first three months of the year you gross 5k and pay your avcs on that basis. Then you get laid off and don't work again all year. Your avc relief was at 40% but you don't reach the higher rate so would only be due the 20% relief.

In that case, if you were paying tax on a pro-rata basis at 40% but stopped working and ended up with gross income that didn't fall into the 40% bracket, then Revenue would rebalance your tax "account" at the year end or on request (see below) to correct things.

Claim an unemployment repayment

If you are unemployed in the current year and have paid tax and, or USC, you may be entitled to claim a refund of tax and, or USC

www.revenue.ie

Bear in mind that pension contribution tax relief reduces your tax bill, it doesn't actually boost the pension contribution - even if that's the net effect and the way that it's often described, especially by pension providers/brokers.

Judging by your and other replies I don't need to worry about this!

Correct.