How to lower my 2017 tax bill. Start a pension?

B

Blue9987

Registered User
Messages
12
Hi all,

First post here so let me know if I discuss anything that isn't permitted.

I had to sell off all my Rabodirect managed funds in 2017 as they were no longer supporting them. I had originally planned to sell them in manageable parcels so that I wouldn't be hit with a huge tax bill, but unfortunately that idea fell through, and now I've got a lovely HUGE bill awaiting me next year.

I was hoping I could do something to perhaps lessen the blow, so looking here for suggestions.

Is starting a pension and paying a lump sum into it one way of getting some of my PAYE tax back for 2017? I'm 40 as of October.

Any other suggestions on how I might lessen the blow next year?

btw I'm done with managed funds now (overall I ended up making a loss when you take into account the funds that were in negative equity.. and now I have to pay 41% EXTRA on the few that were very profitable).
 
not in a position to advise compared to some of the experts here but I empathise with you on the Rabodirect. I also have very high cash outlay next year. Rabo never really sold them with the stigma of "offshore funds" tied to them at the time. They were well able to tell us "no sneaky bits" in their clever advertising in terms of entry exit fees that was true , they were low. But in my opinion quite misleading for amateur investors in their managed funds. You cant rollover losses on them. Oh well I made a few k but boy is the arrears income tax painful when you ve spent the gross amount.
 
Last edited:
Pension or EII scheme. There's not much else out there.

And the problem wasn't the managed funds. The problem was you were forced to sell them when you didn't want to and some of them were still underwater. Most funds are open-ended, so if they do fall in value, you can give it more time to make your money back. Blame Rabo more than anyone else.



Steven
www.bluewaterfp.ie
 
OK, so on the Pension side how does it work? Remember I turned 40 in October so that will affect the calculation.

Say I earned 60K and paid PAYE on it. Do I put 25% of that (15K) into a pension and get some of the PAYE I paid back when I'm filing my taxes in 2018?

Will all pension companies allow this sort of lump sum payment, or do I need to select a specific type of pension?
 
Are you a member of a work pension?

If so, you can do an AVC, and get tax relief that way.

Lump sum conts are allowed, yes.
 
Nope, no work pension. I'll post up the questions I asked in my "Pensions" thread ( thought I had to move it there)...

I turned 40 in October and had planned to start a pension in January 2018.

Q1: Is it possible for me to open a pension before the end of the year, pay a lump sum into it, and claim a tax refund in 2018?

Q2: Assuming the lump sum is something like 15K, what tax do I get back?

Q3: As I only turned 40 in October, am I allowed to put the full 25% of my 2017 earnings into the pension?

Q4: How do I decide between pension providers? Are they all the same, what benefits do I look for when deciding on one over the other?
 
SBarrett said:
And the problem wasn't the managed funds. The problem was you were forced to sell them when you didn't want to and some of them were still underwater.
Click to expand...

Not directed at you personally Steven, I know you had no involvement in the sale of these funds, but it has to be said.

Pensions experts only see what "the problem was" in the rear view mirror.
 
Yeah you see this is the problem I've encountered so far... seems this forum isn't much help at all.

Was worth a shot :(
 
Allowing for the fact that I only see “what the problem was” ,I hope the following helps:
1- if you open a new pension (say a PRSA if no Employer contribution) in 2017 and make a payment before year end , then you can claim relief against 2017income (by making a tax return in 2018)
2- the Tax you get back in 2018 (after you make a tax return) depends on your marginal rate, 20% or 40%.
3- if you turn age 40 in 2017, then the 40% limit applies
4- in terms of picking a provider, well that’s where, perhaps, you need advice. In reality, if you are going the PRSA route, most of the contracts are broadly similar ( in terms of charges). Where they will differ is in terms of investment options, potential performance etc.

I can only apologies (to cremegg etc) that I cannot predict the future. As the saying goes “predictions, particularly about the future, are difficult”.
 
SBarrett said:
The problem was you were forced to sell them when you didn't want to and some of them were still underwater.
Click to expand...
I may be missing something here but why was the OP "forced" to liquidate their shares in the funds offered on Rabo's (now closed) platform?

I thought all investors in the Rabo distributed funds had the option of retaining their interests in those funds through a brokerage account with Cantor FitzGerald. No?
 
Sarenco said:
I may be missing something here but why was the OP "forced" to liquidate their shares in the funds offered on Rabo's (now closed) platform?

I thought all investors in the Rabo distributed funds had the option of retaining their interests in those funds through a brokerage account with Cantor FitzGerald. No?
Click to expand...

My mistake, you are correct
 
cremeegg said:
Not directed at you personally Steven, I know you had no involvement in the sale of these funds, but it has to be said.

Pensions experts only see what "the problem was" in the rear view mirror.
Click to expand...

And that is why I recommend index funds. Market does well, fund does well. Market does poorly, market does poorly. No "we can make money in all type of markets" type ploy that can only be proven, one way or another, in actual market situations.


Steven
www.bluewaterfp.ie
 
Conan said:
Allowing for the fact that I only see “what the problem was” ,I hope the following helps:
1- if you open a new pension (say a PRSA if no Employer contribution) in 2017 and make a payment before year end , then you can claim relief against 2017income (by making a tax return in 2018)
2- the Tax you get back in 2018 (after you make a tax return) depends on your marginal rate, 20% or 40%.
3- if you turn age 40 in 2017, then the 40% limit applies
4- in terms of picking a provider, well that’s where, perhaps, you need advice. In reality, if you are going the PRSA route, most of the contracts are broadly similar ( in terms of charges). Where they will differ is in terms of investment options, potential performance etc.

I can only apologies (to cremegg etc) that I cannot predict the future. As the saying goes “predictions, particularly about the future, are difficult”.
Click to expand...

He's 40, not 60! ;)

25% limit applies to 40 year olds.


Steven
www.bluewaterfp.ie
 
Blue9987 said:
Nope, no work pension. I'll post up the questions I asked in my "Pensions" thread ( thought I had to move it there)...

I turned 40 in October and had planned to start a pension in January 2018.

Q1: Is it possible for me to open a pension before the end of the year, pay a lump sum into it, and claim a tax refund in 2018?

Q2: Assuming the lump sum is something like 15K, what tax do I get back?

Q3: As I only turned 40 in October, am I allowed to put the full 25% of my 2017 earnings into the pension?

Q4: How do I decide between pension providers? Are they all the same, what benefits do I look for when deciding on one over the other?
Click to expand...


Right:

1. You can pay into a pension all the way up to tax return deadline 2018 and claim it back against 2017 income.
2. For a €15,000 premium and paying tax at the higher rate, you get income tax relief of 40% = €6,000. You still have to pay USC & PRSI on the contribution, so the real saving is closer to €5,250.
3. Yes, it is the age you were in the year you are claiming the tax relief.
4. Charging structure and fund choice.


Steven
www.bluewaterfp.ie
 
SBarrett said:
2. For a €15,000 premium and paying tax at the higher rate, you get income tax relief of 40% = €6,000. You still have to pay USC & PRSI on the contribution, so the real saving is closer to €5,250.
Click to expand...

Great thanks.

Final question, just so I'm sure. Assume for arguments sake that net earnings for 2017 were 60K, so I'm paying the 40% rate.

Is 25% of 60K (i.e. 15K) the max I can pay into the pension in order to get the 40% tax refund in 2018, or can I pay in 30K and get roughly double the refund in 2018?
 
SBarrett said:
You can pay double and claim 15k in respect of 2017 and €15k in respect of 2018.
Click to expand...

Grand so 15K is the limit for 2017?

Cool that's all I needed to know. I'll deal with 2018 separately as I'll be contracting then and on a different payscale.
 
When you say you'll be contracting, do you mean via your own ltd company?

Your pension options change once you're self employed, and I'd highly recommend getting proper advice on your options and the tax implications specific to your circumstances, particularly if you envisage contracting for a while.
 
You must log in or register to reply here.
Back
Top