Deadline for Pension Tax Relief fast approaching
The deadline for claiming tax relief against 2021 earnings by making a pension contribution is the 31st October – for those who pay and file online using ROS you get an extra fortnight until the 16th November.
So, whether you are self-employed or a PAYE taxpayer time is running out to take advantage of the tax relief that is available by topping-up your existing pension or starting a new plan.
Self Employed Taxpayers
The benefits of making a pension contribution before the deadline are:
- Reduce your final income tax liability for 2021;
- Reduce your preliminary income tax bill for 2022; and
- Make a tax efficient investment which will grow tax free to help provide for your retirement.
To make a pension contribution and back date the income tax relief against your 2021 earnings you need to do the following:
- Pay your pension contribution on or before the relevant deadline; and
- Submit your tax return to Revenue on or before that deadline.
PAYE Taxpayers
The benefits of making a pension contribution before the deadline are:
- You could receive a tax rebate from Revenue as all income tax for 2021 should have already been paid in full via the PAYE system; and
- Make a tax efficient investment which will grow tax free to help provide for your retirement.
As an employee who wants to make a pension contribution and set it against your 2021 tax bill you must:
- Pay your pension contribution on or before the deadline;
- Send your tax return to Revenue, and opt to backdate the pension contribution to the 2021 tax year. It is very important to check that tax relief has not already been given in the current tax year. Your employers’ payroll administrator will be able to confirm this.
Tax Relief – how much can you get?
Relief is calculated at your marginal tax rate as you contribute to your pension. For every €100 you invest in a pension, the real cost to you after tax relief is:
- €80 if you pay tax at 20%
- €60 if you pay tax at the top rate of 40%
Limits for Tax Relief on Pension Contributions
Tax relief for pension contributions is subject to two main limits:
An Age-Related Earnings Percentage Limit:
Age % of earnings
Under 30 15%
30-39 20%
40-49 25%
50-54 30%
55-59 35%
Total Earnings Limit:
The maximum annual earnings that can be taken into account for calculating tax relief is €115,000 per year.
So why not take control of your own financial future?
Speak with a Financial Broker who can guide you through each of the steps, help answer the important questions, and demonstrate why making a pension contribution can be one of the smartest financial decisions you can make.
If you currently have a pension but are unsure, or want to learn more about how it is invested or performing, or if you are in business and looking for a pension for yourself or a group scheme for your employees, your Financial Broker can give you the expert pension advice you require to ensure that your pension plan meets your needs.
Why Choose MLMG Financial Brokers
At MLMG Financial Brokers we believe in keeping it simple. Put simply financial planning is ensuring that you are as well prepared as you can be to meet the financial demands that will face you at different stages of your life. We provide honest, expert financial advice in a way that is easy to understand. Every client, big and small, is treated the same; you will be advised on the basis that we are standing in your shoes. We will take the time to ensure you fully understand your finances and your financial needs. We have agencies with all the major product providers in Ireland but are not tied to any particular provider. With well over 60 years’ combined experience in financial services, you can trust our expert advice.
Contact us today or call us on 07493 21420 for your no-obligation consultation.
