Higher rate of tax

[ph4t]

For a single bloke in his twenties, at what level does the higher rate of tax kick in?

 

[Gervan]

The lower tax rate band applies to the first €36,400 earned in the year.

 

[tenchi-fan]

Don't forget though, if you go over this level you should definitely contribute to a pension to avail of the tax saving - that way you can avoid paying the higher rate for another few thousand.

 

[ph4t]

Don't forget though, if you go over this level you should definitely contribute to a pension to avail of the tax saving - that way you can avoid paying the higher rate for another few thousand.

Yeah I'm already putting 15% of my salary into a PRSA.

I'm 30 this year and I can increase that to 20%. I was just trying to figure out will I get the full tax benefit if I increase my contribution from 15% to 20%.

Would I be right in saying that as long as you earn more than €45,500 (€36,400/(1-20%)) then you would get the full tax benefit of making a 20% annual pension contribution?

 

[ph4t]

I.e. that the first 20% of €45,500 would go into your pension bringing you down to the threshold of €36,400.

So if you earn between €36,400 and €45,500 then you shouldn't contribute 20% to your pension as you won't get the full tax benefit.