Tax Relief

R

redape

Registered User
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20
Evening, does anyone know how tax relief would work in this example situation...

- higher rate tax payer
- full year of paye in 2008 but no pension, continuing to work in 2009 (hopefully!)
- start a pension this month (jan 2009) with monthly contributions

Am I right in thinking that I can make a lump sum payment against 2008 income and claim back 41% whilst the regular monthly contributions in 2009 also benefit from 41% relief?

TIA.
 
redape said:
Am I right in thinking that I can make a lump sum payment against 2008 income and claim back 41% whilst the regular monthly contributions in 2009 also benefit from 41% relief?
Click to expand...

Yes, you can pay a backdated contribution for 2008 and claim relief against your 2008 income, provided you do so before the tax filing date for 2008 (end October 2009 or mid November 2009 if using ROS). You can also claim relief against your current year's income in respect of your regular monthly contributions.

Your employer is obliged to facilitate you making the regular contributions through payroll out of your pre-tax income, either through a company pension scheme or a PRSA. By adopting this approach, you will also automatically get relief from income tax and PRSI on your regular contributions and your employer will also get relief from employer's PRSI.

The backdated contribution will have to be paid gross (i.e. out of after tax pay), but as you are a PAYE taxpayer, you can claim relief from PRSI as well as income tax.

If you exceed the PRSI threshold for the year, the PRSI relief you get will effectively be at 2% (2.5% if your income exceeds €100,100).

Regards
Homer
 
Thanks very much Homer. I'm actually an IT contractor so I know there are a few pension options available, time to get reading.
 

I have a related question to your answer. I want to make an AVC for 2008 in the coming weeks. I know how I get my tax relief back, but how do I get my PRSI back. Is this a seperate form and application?

Thanks,
 
It says it on the notes of the form that Oysterman has linked to, but in case you don't spot it, you have to claim and receive the tax relief first, before claiming for the PRSI relief.
 
Lads, many thanks for the link to that form. My tax return is ready to go, just have to pay the AVC and watch it lose money
 
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