Tax Savings Opportunity for Self Employed

01 Oct 16

October is the dreaded tax bill month for many. Tax, Tax and more Tax.

Well this year why not take some initiative and reduce your tax bill with a pension contribution?

If you are Self Employed, a Company Director or a PAYE Employee then you will need to file your 2015 self assessment tax return by 31st October (12th November if you file online).

If you are self employed you must complete the return, even if your main income is taxed by PAYE. If you are a PAYE employee then you only need to complete the return if you have extra income or want to apply for a tax refund.

If your income includes non PAYE income then you must pay any balance of Income Tax, PRSI and USC outstanding from the 2015 tax year.

The good news is that you can reduce or perhaps eliminate your tax bill. You might even be able to get a refund cheque from the taxman! This can be done by making a lump sum pension contribution and backdating the tax relief to your last tax year.

Example 1

John is a Proprietary Director. He paid income tax at 40% in 2015. He makes a pension contribution of €20,000 by 31st October 2016 and he is then entitled to the following refund,

So John gets a tax refund of €8,000 by making a €20,000 Pension contribution.

Example 2

Mary is a PAYE employee and has paid 40% tax in 2015. Mary also has two rental properties and the taxable income means an extra tax bill of €8,000.

Instead of paying the €8,000 tax bill, Mary can make a lump sum pension contribution of €20,000 and reduce the tax bill.

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If you would like to talk about reducing your tax bill with a Pension contribution then please call Stephen on 01 707 9880 or email admin@northwood.ie

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