Pay and File deadline approaching

The system designed for the self employed, which is known as Pay and File, allows you to file your return and pay the balance of tax outstanding for the previous year at the same time.

In conjunction with Pay and File, the Government is actively encouraging people to save for retirement through personal or company pensions. In general terms whatever type of pension you are eligible for, you get three generous tax breaks:
You get tax relief, up to certain limits, on the money you pay into a pension fund. In general, contributions paid into a pension plan benefit from tax relief at your highest rate. For example, if you pay €100 per week into a pension plan and you pay tax at the higher rate (currently 41%) then the net cost to you is €59 per week. If you are a PAYE employee you may also benefit from PRSI relief.
Your pension contributions are invested in exempt funds. Growth in these funds is generally exempt from Irish income tax and capital gains tax as well as DIRT tax.
When you retire you have a number of different options available to you. With many pension plans, you may have the choice to take part of your investment savings as a tax free lump sum. Depending on the type of pension you have and some other factors, you may decide to take a guaranteed income for life or you may be eligible for other investment options.
In the future, retired people will make up a large proportion of the population of Europe. This will put additional strain on the provision of the state pension. As it is, the state pension (non-contributory) of €206.30 (personal rate from January 2010), may not be enough for you to comfortably maintain the living standards you enjoyed during your working life. What’s more, there is no guarantee of the level of the state pension in the future,
Subject to eligibility, there are a variety of retirement plans to help you provide for your retirement. These include:

Personal Pension Plans
A Personal Pension Plan is an option for people who are taxed under schedule D (self-employed) or who are employees taxed under Schedule E (PAYE) and do not participate in a retirement scheme provided by their employer. The individual makes the contributions themselves and claims tax relief against relevant earnings assessable to Irish tax.
Tax relief on personal pensions is allowed on contributions up to certain levels related to your age and earnings. Specifically, your income, for taxation purposes, is defined as net relevant earnings. It includes earnings from professions, trades and non-pensionable employment less capital allowances, losses and certain charges. Income in excess of €150,000 will not qualify for tax relief.
There are some specified jobs such as certain sports-related jobs where tax relief is available at 30% per year regardless of age.
If you cease to have income which qualifies then you will no longer receive tax relief on contributions to your personal pension plan and you should reconsider your retirement options. If you expect to pay no further premiums then your policy can be made paid up which means your retirement fund continues to be invested and have charges deducted until you retire and access your fund.
With a personal pension plan you can decide to take your retirement benefits at any time between the ages of 60 and 75. However in some cases, e.g. if you were permanently unable to work, the Revenue Commissioners may allow you to retire before the age of 60. People in some specified occupations, including certain sports people, are allowed to retire early without having to be in ill health.

Executive pension plans
Executive pension plans are generally established by employers for company directors or senior employees, remunerated by salary or fees chargeable to income tax under Schedule E (PAYE). An executive pension scheme allows the employer to provide benefits in addition to employee contributions so that a level of retirement income may be targeted at a significant replacement level relevant to pre retirement remuneration.
The maximum benefit that may be funded is a replacement income at normal retirement age of two thirds of final remuneration. In addition, payable upon your death, a spouse’s pension may be provided for up to 100% of your pension.

All pensions may be increased in line with the Consumer Price Index (CPI) to protect against inflation. The annual cost of providing this executive style retirement package is allowed as a business expense incurred by the employer.

For more information contact Carey Corbett Financial Solutions on 065 6893549.