Sole Trader pension tax relieved contribution percentages allowable

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Secondincommand

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How much can a 45 year old sole trader put in to their pension , gaining tax relief on profits if they earned €60,000 nett income.
Is it 25% or €15,000 the same as an ordinary PAYE earner or is there special rules for business owners , the same as a limited company ?
 

This might help ?​

Age-related earnings percentage limits​

You can get tax relief up to the relevant age-related percentage limit of your earnings in any year.

You might have more than one source of income. If you do, this relief is only from the source of income in respect of which the contributions are made.

Age-related percentage limit for tax relief on pension contributions
AgePercentage limit
Under 3015 %
30-3920 %
40-4925 %
50-5430 %
55-5935 %
60 or over40 %
For example, an employee who is aged 42 and earns €40,000 can get tax relief on annual pension contributions up to €10,000.

Total earnings limit​

The maximum amount of earnings taken into account for calculating tax relief is €115,000 per year.
 
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So , in theory , on €60,000 income a sole trader could contribute , say €35,000 to a pension ,if they can afford to live on the remaining €25,000 and earn their income just paying basic USC and PRSI on the €25k ?
 
Last edited:
marsaday said:
So , in theory , on €60,000 income a sole trader could contribute , say €35,000 to a pension ,if they can afford to live on the remaining €25,000 and earn their income just paying basic USC and PRSI on the €25k ?
Click to expand...

There is no impediment to a sole trader contributing €35,000 out of earnings of €60k (58%) to a pension for themselves but the income tax relief in that tax year will be restricted to the age-related % outlined above (i.e. 25% x €60k = €15k, for a 45-year old).

In this situation, €20k (€35k - €15k) of pension contributions would have to be carried forward to be set against earnings in a future year(s). See Example 2 in section 26.3 here:


Pension contributions provide relief against income tax. They do not shelter income against the charge to USC or PRSI. If €15k is contributed to a pension by a sole trader, the earnings subject to income tax is €45k and the earnings subject to USC & PRSI is €60k:

Tax relief for pension contributions

This page outlines the tax relief for pension contributions
www.revenue.ie www.revenue.ie
 
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