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Pre Income Tax Savings

  • 06-09-2012 8:34pm
    #1
    RBX
    Registered Users, Registered Users 2 Posts: 24 ✭


    Hello

    Anyone know if there is any facility to make pre-tax contributions to some sort of savings fund in this country? I'm looking at statesavings.ie, which seems to be a system where you put your money directly with the Irish Govt, but it seems unclear if lodgements would come from Gross or Net salary.

    Essentially I'm looking for a scenario where for example over four years:
    • On years 1, 2, and 3:
      • I earn 50k
      • I contribute 10k to my savings account ( which the govt has immediate use of )
      • I pay PAYE, PRSI, etc on the 40k balance
    • On year 4:
      • I earn nothing
      • I withdraw the 30k that I've been saving for the 3 years before that.
      • I pay PAYE, PRSI, etc on the 30k in year 4
    Use cases ( for me ) would be where I want to either take a year out after a few years ( perhaps to return to education ), or wait until there is a more friendly tax climate before taking delivery of the funds. Use case for the Govt, would up front access to 100% of the money lodged, as opposed to just the 52% that they get from PAYE, PRSI, etc.


Comments

  • #2
    Shane732
    Registered Users, Registered Users 2 Posts: 5,003 ✭✭✭Shane732


    RBX wrote: »
    Hello

    Anyone know if there is any facility to make pre-tax contributions to some sort of savings fund in this country? I'm looking at statesavings.ie, which seems to be a system where you put your money directly with the Irish Govt, but it seems unclear if lodgements would come from Gross or Net salary.

    Essentially I'm looking for a scenario where for example over four years:
    • On years 1, 2, and 3:
      • I earn 50k
      • I contribute 10k to my savings account ( which the govt has immediate use of )
      • I pay PAYE, PRSI, etc on the 40k balance
    • On year 4:
      • I earn nothing
      • I withdraw the 30k that I've been saving for the 3 years before that.
      • I pay PAYE, PRSI, etc on the 30k in year 4
    Use cases ( for me ) would be where I want to either take a year out after a few years ( perhaps to return to education ), or wait until there is a more friendly tax climate before taking delivery of the funds. Use case for the Govt, would up front access to 100% of the money lodged, as opposed to just the 52% that they get from PAYE, PRSI, etc.

    Pensions are your only real option here.

    Other options would be making investments which are tax deductible such as EIIS and Film Schemes.

    Film Schemes work well if you're looking for small gains of €2,000 - €4,000 per year. The risk on film schemes is extremely low.


  • #3
    RBX
    Registered Users, Registered Users 2 Posts: 24 ✭RBX


    Shane732 wrote: »
    Pensions are your only real option here.

    Other options would be making investments which are tax deductible such as EIIS and Film Schemes.

    Film Schemes work well if you're looking for small gains of €2,000 - €4,000 per year. The risk on film schemes is extremely low.

    Thanks Shane. I did look into pensions before, specifically PRSAs, and it's my understanding that Pensions can't be withdrawn until retirement. I'm significantly more than 4 years away from retirement age. Are there other pensions that I can withdraw on demand, and pay income tax on withdrawal?

    With regard to gains, while I wouldn't say no to them, I'm more interested in stemming a 52% loss to tax, and utilising the equivalant of Year 4's ( as per the above example ) tax credits and 20% band, which I would otherwise be unable to, since I wouldn't be earning any actual income in year 4.

    How do Film Scheme ( and EIIS ) investments typically work? Would there typically be agencies, that take my cash, go make films, and return my investment plus profit at a later date, or is it more complicated than that?


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