1. How to save tax

(a) PAYE Earners
• There are millions of unclaimed tax refunds every year. Why? Because people not aware of what can be claimed.
• Can claim back refunds for last 4 completed tax years.
  
• Most common overlooked claims are:
  • Medical expenses at 20% tax relief
  • Employee Flat rate expenses – run from circa €30 up to €700 for certain employments.
  • Employers paying medical insurance on behalf of employees

Example

Where medical insurance is paid by your employer, a personal tax claim must be made to Revenue for tax refund. A typical family premium for parents and two children of €3k gross if paid by employer is taxed as a Benefit In Kind (‘BIK’) through PAYE system but personal tax refund due to employee €600.

• If you have a company car check operation of the BIK as figures may be incorrect if out ill for long period / working abroad / in circumstances where car not being used then reduced BIK.
• PHI – permanent health insurance policies full tax deduction is available at your top tax rate. If an individual is paying for this cover personally then they need to claim it back from the Revenue.

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2. Pension Funding

• • Tax relief is still available for personal pension funding at your top tax rate. Pension funding can be used to reduce last year’s tax bill.

Example

Married person one spouse working salary €60,000 and age 45.
This person could make a personal pension contribution of €15,000 and get a tax refund of €6,000.

3. Married couples – income splitting to reduce impact of levies

• • Spouses divide investment / rental income between them. If one spouse has low income then this may avoid/reduce Income Tax/ PRSI & USC Levy.

Example

Married couple. Spouse A has income €60K per annum and rental income profit of €8K per annum. Spouse B no income.
Save tax of circa €2k per annum by transferring rental property to Spouse B. No capital gains tax or gift tax involved.

4. Retired Couples

• • Help from family members using deeds of covenant to transfer income from children to parents. Depending on circumstances parents could be tax exempt on the income received while their children obtain tax relief at 40% on the payments to their parents.

Example

Elderly parents living on state pension of circa €23k per annum.
Children paying tax at top tax rate.
Children enter deed of covenant to pay parents €10k per annum.
Parents are not taxable on this income but children receive tax relief at 40% on payment so only costing them €6k per annum.

5. Self Employed – involving family in business

• Working from home – various expenses that can be claimed.
• Spouse – employee or business partner if not otherwise earning to get increased 20% tax rate worth circa €5K pa
• Children – can be paid a salary for work completed and can earn up to €8,250 tax free working part time in the family business.
• Extra scope for pension funding.
• Where spouse or children engaged in the business it must be commercially justified.

6. Capital Gains Tax

Disposals to use up the annual tax exemption of €1,270. This applies separately for spouses so each spouse has to make a disposal to avail of it. The annual cash saving is €419 per person.

7. Gift/Inheritance Tax

Annual tax exemption of €3,000. Parents can gift €6,000 per annum tax free to children. Annual Tax saving is €1,980. €3,000 per year can also be given free of tax to grandchildren. This is a very good way to reduce the value of your estate and save on inheritance tax.

8. Houses for children

A lot of parents now have to help their children acquire a house. Help ranges from making up initial deposits to providing substantial lump sums towards the cost of a house or to reduce an existing mortgage. All financial assistance provided to children has tax implications and we can advise on what is best for your particular situation.

We can provide further advice on any of the above topics by way of consultation.