Tax Relief PRSA

G

Greasemonkey

Registered User
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Hi , Appreciate if anyone can throw some light on following
For a paye worker paying privately into a prsa, is the full 40% tax relief only allowed on proportion of income tax paid at 40% ?
Say for example income tax of 3k paid at 40%, 7k @20%, tax credit of 3k leaves essentially no tax paid on higher rate.
How would a 10k pension contribution generate relief?
 
No, the pension contribution goes against the income rather than against the tax liability.

So say someone has €40k of income and they have €4k of income taxed at 40%, with the rest either taxed at 20% or tax-free.

They make a €10k pension contribution. €4k of it attracts relief at 40%, with the other €6k attracting relief at 20%.
 
Not quite how it works - in reality, the income is reduced by the pension contribution before the tax is calculated. So the income is reduced from 40k to 30k which is then taxed at 20%

However the effect is the same
 
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