Tax on Pension Contributions

FeelTheBern

Looks like going to have more tax than I expected to pay on farm income for 2016. Sickener to be slaving away farming as well as working full time and then get hit with high rate tax on it too. Basically sold cattle but didn't buy enough before end of tax year.

I understand that if I make a pension contribution then could get tax relief on that payment to lower my tax liability - am I right in presuming that would have to set up some sort of personal pension plan to make that payment to and couldn't just make an additional avc payment to the plan I'm in with the day job?

Grueller

FeelTheBern wrote: »

Looks like going to have more tax than I expected to pay on farm income for 2016. Sickener to be slaving away farming as well as working full time and then get hit with high rate tax on it too. Basically sold cattle but didn't buy enough before end of tax year.

I understand that if I make a pension contribution then could get tax relief on that payment to lower my tax liability - am I right in presuming that would have to set up some sort of personal pension plan to make that payment to and couldn't just make an additional avc payment to the plan I'm in with the day job?

I am no accountant so take this with a handful of salt. My pension advisor told me that an additional avc is acceptable for tax relief. Check with somebody who knows for sure though.

Bass Reeves

FeelTheBern wrote: »

Looks like going to have more tax than I expected to pay on farm income for 2016. Sickener to be slaving away farming as well as working full time and then get hit with high rate tax on it too. Basically sold cattle but didn't buy enough before end of tax year.

I understand that if I make a pension contribution then could get tax relief on that payment to lower my tax liability - am I right in presuming that would have to set up some sort of personal pension plan to make that payment to and couldn't just make an additional avc payment to the plan I'm in with the day job?

You can make a contribution to your work AVC. However just that it is the 14/11 is the claim date not 31/10. You need the cert back or at least a copy of it for your accountant before tax return date

FeelTheBern

Bass Reeves wrote: »

You can make a contribution to your work AVC. However just that it is the 14/11 is the claim date not 31/10. You need the cert back or at least a copy of it for your accountant before tax return date

That's great. My initial plan was the above - to make an AVC into my work Pension so as to decrease the self employed farm tax liab for 2016 (and prelim for next year) but thought maybe wouldn't work that way.

lakill Farm

FeelTheBern wrote: »

That's great. My initial plan was the above - to make an AVC into my work Pension so as to decrease the self employed farm tax liab for 2016 (and prelim for next year) but thought maybe wouldn't work that way.

Filing deadline 16 Nov 2017 now

Storm extension

adam14

You can't put it into a work pension avc. You'll have to set up a personal pension plan or prsa separate to your employer pension.

FeelTheBern

adam14 wrote: »

You can't put it into a work pension avc. You'll have to set up a personal pension plan or prsa separate to your employer pension.

Right - now I really am confused cos that's the opposite of advice above!

I paid normal 5% employee contribution into my work pension so I know that I can make an AVC to that workpension plan - but are you saying that this won't do anything to lower my farm tax bill for 2016 ( and prelim for 2017) - which is the objective of the whole exercise!!

Bass Reeves

adam14 wrote: »

You can't put it into a work pension avc. You'll have to set up a personal pension plan or prsa separate to your employer pension.

You can I did it this year however the disadvantage maybe that it is part of your work pension so you cannot draw it down pre work retirement if you wished to retire from farming earlier. However opening a new AVC this year was not an option from FTB he just wanted to sort a tax issue. Longterm a seperate AVC may be a better choice.

adam14

I'd advise keeping them separate

FeelTheBern

Bass Reeves wrote: »

You can I did it this year however the disadvantage maybe that it is part of your work pension so you cannot draw it down pre work retirement if you wished to retire from farming earlier. However opening a new AVC this year was not an option from FTB he just wanted to sort a tax issue. Longterm a seperate AVC may be a better choice.

Thanks - as long as it will work to sort the tax issue for me this year without needing to set up a new personal that will do me.

There also seems be some kind of issue about calculating my maximum permitted AVC because I have both PAYE and self employed income - but maybe that's even more complicated!!

FeelTheBern

adam14 wrote: »

I'd advise keeping them separate

Is that for the reason Bass gives above or some other reason?

Bass Reeves

FeelTheBern wrote: »

Thanks - as long as it will work to sort the tax issue for me this year without needing to set up a new personal that will do me.

There also seems be some kind of issue about calculating my maximum permitted AVC because I have both PAYE and self employed income - but maybe that's even more complicated!!

Maybe it is your maximun contribution to a pension fund this year below are revenue details

The age-related earnings percentage limits
You can get tax relief on your pension contributions up to the relevant age-related percentage limit of your earnings in any year. This relief is only from the employment in respect of which the contributions are made.


under 30: 15%
30-39: 20%
40-49: 25%
50-54: 30%
55-59: 35%
60 or over: 40%.
For example, an employee who is aged 42 and earns €40,000 can get tax relief on annual pension contributions up to €10,000.

Total earnings limit
The maximum amount of earnings taken into account for calculating tax relief is €115,000 per year.

You then can calculate amount allowed by combing your farm profit with your work income and use the limits above. For those under 30 of your contributing 5% and your employer is topping it up you could be hitting the 15% max contribution fairly fast

adam14

If you started a prsa you could access benefits at 50. Early retirement under your employer pension scheme might be trusted consent so might not be possible until 60 and might leave you with a very poor pension. It just leaves the opportunity under current pension legislation to have flexibility to access some money, if required

FeelTheBern

adam14 wrote: »

If you started a prsa you could access benefits at 50. Early retirement under your employer pension scheme might be trusted consent so might not be possible until 60 and might leave you with a very poor pension. It just leaves the opportunity under current pension legislation to have flexibility to access some money, if required

Thanks, I'll use the work pension to help with the tax this year and will see about setting up personal pension plan before Nov comes round again next year - probably a good idea for me to be saving more anyway!

FeelTheBern

Bass Reeves wrote: »

Maybe it is your maximun contribution to a pension fund this year below are revenue details

The age-related earnings percentage limits
You can get tax relief on your pension contributions up to the relevant age-related percentage limit of your earnings in any year. This relief is only from the employment in respect of which the contributions are made.


under 30: 15%
30-39: 20%
40-49: 25%
50-54: 30%
55-59: 35%
60 or over: 40%.
For example, an employee who is aged 42 and earns €40,000 can get tax relief on annual pension contributions up to €10,000.

Total earnings limit
The maximum amount of earnings taken into account for calculating tax relief is €115,000 per year.

You then can calculate amount allowed by combing your farm profit with your work income and use the limits above. For those under 30 of your contributing 5% and your employer is topping it up you could be hitting the 15% max contribution fairly fast

Are the employer contributions included in calculating the % limit as well as the employee contributions?

Bass Reeves

FeelTheBern wrote: »

Bass Reeves wrote: »

Maybe it is your maximun contribution to a pension fund this year below are revenue details

The age-related earnings percentage limits
You can get tax relief on your pension contributions up to the relevant age-related percentage limit of your earnings in any year. This relief is only from the employment in respect of which the contributions are made.


under 30: 15%
30-39: 20%
40-49: 25%
50-54: 30%
55-59: 35%
60 or over: 40%.
For example, an employee who is aged 42 and earns €40,000 can get tax relief on annual pension contributions up to €10,000.

Total earnings limit
The maximum amount of earnings taken into account for calculating tax relief is €115,000 per year.

You then can calculate amount allowed by combing your farm profit with your work income and use the limits above. For those under 30 of your contributing 5% and your employer is topping it up you could be hitting the 15% max contribution fairly fast

Are the employer contributions included in calculating the % limit as well as the employee contributions?

You are right I made a mistake I think the employers contribution are not included

J.O. Farmer

Bass Reeves wrote: »

You are right I made a mistake I think the employers contribution are not included

No I think you were right first time as employers contributions are made in your name and are part of your renumeration package. It's money you receive just not directly.

FeelTheBern

J.O. Farmer wrote: »

No I think you were right first time as employers contributions are made in your name and are part of your renumeration package. It's money you receive just not directly.

I've had a look at the Pension Authority website and I think it clears up this one.

Employer contributions to occupational pensions are made in addition to the % contribution limits.

Employer contributions to PRSAs are subject to the overall contribution limits.