DELLBOY 08
Registered User
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- 75
I have two questions which I'd greatly appreciate responses to.
1.) If you are paying into a Defined Contribution Pension Scheme & are earning a basic gross salary of lets say €35,500 (ie. only €100 of salary taxed @ 41%), will you only receive tax relief @ 41% on the first €100 contributed or on all of your contributions?
2.) If the above is correct (ie. tax relief only @ 41% on the first €100 of your contributions), is there any way of making an annual bonus work to your advantage? Is it possible to make only one annual payment into your pension fund in the month you receive your annual bonus so that all your contributions receive tax relief @ 41%?
1.) Yes
2.) You don't have to re-arrange things. In the example you give, let's say you're paying €1,500 per year to the pension scheme, in monthly contributions. Your taxable income is thus reduced to €34,000. So you then get a bonus of €1,400. Your bonus is only taxed at 20%.
If you hadn't been paying the monthly contributions, you'd end up paying tax at 41% on the bonus.
I don't know why your payroll people are allowing you tax relief at 41% on the entire contribution. Usually such calculations are done by the payroll software package they use, unless they're doing the calculations manually.
Incidentally, a contribution of €1,775 per year effectively reduces your gross salary by €1,775 per year for the purpose of calculating your tax and PRSI.
If you mean you will ignore the potential under taxation and hope for the best then this is foolhardy. The onus is ultimately on YOU the individual to make sure that your tax affairs are kept up to date. Ignoring the issue is probably simply postponing the inevitable of having to pay back underpaid tax.
I thought that they were already answered?Point taken. Clubman can you offer any input to my queries above?
The former.1.) If you are paying into a Defined Contribution Pension Scheme & are earning a basic gross salary of lets say €35,500 (ie. only €100 of salary taxed @ 41%), will you only receive tax relief @ 41% on the first €100 contributed or on all of your contributions?
Your tax/PRSI relief will be the same and based on total taxable income regardless of the salary/bonus split.2.) If the above is correct (ie. tax relief only @ 41% on the first €100 of your contributions), is there any way of making an annual bonus work to your advantage? Is it possible to make only one annual payment into your pension fund in the month you receive your annual bonus so that all your contributions receive tax relief @ 41%?
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