Would You Like To Reduce Your Income Tax Bill?

The income tax deadline is coming up and while it is a familiar time for those who are self-employed it may not be for those who are PAYE workers. It’s that time of year again where you get the last and final shot to reduce your tax bill for the previous year. The simple fact of the matter is there are very few ways to pay less tax, I suppose you could earn less but that’s not really a solution! The one proven way to significantly reduce your tax bill while also generating long term personal wealth is by making a contribution to your pension. And don’t worry if you don’t have a pension yet, we will get to that part too.

We have proven in Ireland that we are a nation of savers. Household deposits are at an all time high at more than €130 billion. Incredibly, with interest rates at an all time low, we are saving more than €1.3 billion per month into accounts that do nothing to protect our hard-earned money against inflation. Surely there must be a better way – and there is. By making a contribution to a pension, and it can be a personal pension, PRSA or a company pension plan as an Additional Voluntary Contribution (AVC), you could get up to 40% of the contribution back from the Revenue.

Using an example of a contribution of €10,000 you could turn this into a value of €14,000 personal wealth overnight – €10,000 in your pension and €4,000 in your hand with a refund from Revenue or €4,000 off your 2020 tax bill. Leaving that money in the bank at 0.05% per annum would take 68 years to turn it into €14,000!!! That is also before you take account of the cost of goods and services rising over time meaning that €10,000 would buy less things every year. The rate of inflation in Ireland is currently at 2.2% per annum (CSO.ie, August 2021). Which approaches sounds like your money is working harder for you rather than you working harder for money?

All sounds good. There is a limit on what you can get into your pension and claim the tax relief and it is a percentage of your income – up to €115,000. The percentage is determined by your age as set out below.

The other side is having the correct pension and investment approach for you. That is where Maven come in to help you make the most of your money. If you are self-employed or in a job where there is no pension the likelihood is you will contribute to a Personal Pension Plan. If you are business owner or employed you will contribute to either a company pension plan or Personal Retirement Savings Account (PRSA). The most important factor is to get the balance right between the charging structure and the investment funds available. Be sure to contact us on 091 769 566 to start making your money work harder for you.