TAX TIPS

TOP 10 TAX TIPS

There are millions of unclaimed tax refunds every year. Why? Because people not aware of what can be claimed.

So, what does the term PAYE mean?
To put it simply, Pay As You Earn. It is a system whereby the Irish Government take the correct amount of income tax, USC and PRSI off your pay, (or so they would have us believe) – according to what you earn. This is taken straight out of your pay-cheque and sent straight to revenue who in turn pay this to the Irish Government.

Who pays PAYE income tax?
Most people who work in Ireland pay income tax on their earnings via the PAYE system. Nobody wants to give their money to the Tax Man… so we have generated 10 top ways of keeping your payments to Revenue as little as possible…

Keep your paperwork in order! This means, keep receipts for any medical/non routine dental care, doctors visit’s etc so you can claim the 20% back on these against what you owe to revenue for tax for that year. It’s important to note that revenue can request these at any stage within 6 years so, make sure you keep them somewhere safe!

Tax credits might sound complicated but in reality, they’re not. A tax credit works by reducing the amount of tax that you pay by the size of the tax credit. So a €500 tax credit would reduce your yearly tax liability by €500. A €1,000 tax credit means you pay €1,000 less in tax and so on.

Certain professions can also claim for expenses (namely tools, uniforms, mileage for home carers and stationery) that are incurred as part of carrying out their day-to-day work. These are called flat-rate expense allowances.

For example, a nurse who supplies and launders his or her own uniform can claim a tax allowance of €733. And a skilled worker in the engineering or electrical industry who bears the full cost of their own tools and overalls can claim an allowance of €331.

It might not be the most romantic reason to get married but most of the time, it makes financial sense – particularly if you are planning to have a family!

If you’re earning a lot more than your spouse and/or your spouse isn’t using up all of their tax credits, you can transfer some of your spouse’s credits over to you to reduce your overall tax liability as a couple.

This might sound a bit complicated but the simple point to remember here is that the Irish tax system greatly favours married couples over single people so if you’re recently married make sure you’re taking full advantage.

Aside obvious, setting yourself up for the twilight years – pensions are extremely tax-efficient as any money you save into a pension is tax exempt up until a certain amount.

To explain: If you were to save €100 a month into a pension, you won’t pay any income tax on that €100. So if you’re a higher-rate taxpayer a €100 monthly contribution will cost you just €60 in net terms (the other €40 which you’re putting into your pension would otherwise have been taken from your payslip in income tax).

So more money for you and less for the tax man – a real win-win here!

The Cycle-to-Work Scheme was launched in 2014 and aims to encourage employees to cycle to and from work. Under the scheme your employer can pay for bicycles and bicycle equipment for you which you pay back through your salary over a period of up to 12 months. You then don’t have to pay any income tax, PRSI or the Universal Social Charge on your repayments.

There is a limit of €1,250 per bicycle purchased (increased from €1,000 in August 2020) and €1,500 for electric bikes and the purchase can be made in any cycle shop.

So if you’re a higher-rate taxpayer and you purchase a new bike for €1,000, it’ll only cost you just over €500, spread out over 12 monthly payments.

College is like 2 sides of a coin – it’s expensive but worth it! The good news is, there is 20% Tax relief on part and full time 3rd level and above courses and is available to the person who paid the fees, not the person studying!

However the relief only applies to amounts up to €7,000 per third-level course per year. Unfortunately the first €3,000 of fees for a full-time course and €1,500 for a part-time course do not qualify for relief each tax year – this only applies to the FIRST claim you make; if you make a second claim in the same year then you can claim on the full qualifying amount up to €7,000.

So the kids have flown the nest and their rooms are now lying empty! What better way to utilise this free space than renting a room. Under Irish rental law, if you’re renting a room or a couple of rooms in your house you are entitled to claim ‘Rent-a-Room’ relief. What’s more, you won’t have to register as a landlord, and the agreement you enter into with any renters will be less formal than it would be under landlord and tenant legislation.

And the good news is, you can earn up to €14,000 tax free rental income through this scheme!

Over 60,000 stay-at-home parents in Ireland are unaware they could be owed money for looking after dependents! And the good news is, you can still claim if you work and earn less than €10,400 per year.

This type of tax relief is one that many people unnecessarily miss out on either because they are unaware of its existence or they are unsure if they qualify. For example, a wife or husband taking care of the kids at home full-time is likely to qualify for the tax credit. See our ‘What can I Claim’ for more information.

Countless workers across Ireland who are working from home due to the Covid-19 outbreak are entitled to avail of remote-worker tax relief.

Remote-worker relief is a tax relief on expenses which people may incur while working from home. Remote-working is characterised as working for substantial amounts of time outside your normal place of work.

So, if you work from home either full or part time, you may be eligible for tax relief.