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Tax relief on pensions and employer contributions.

  • 20-08-2018 8:56pm
    #1
    s7ryf3925pivug
    Closed Accounts Posts: 4,007 ✭✭✭


    Say I direct 20% of my salary to be a pension contribution. I don't have to pay the higher rate of tax on that money, but I do pay the standard tax rate on it - right?

    Say my employer offers a benefit of matching my pension contributions. That is treated as a benefit in kind, so I pay the higher rate of tax on that portion - right?

    If I opt to direct 10% of my income to a pension, then the employer's contribution is still treated as a benefit in kind and liable to the higher tax rate. I don't get the tax relief available to me for personal contributions - right?

    Is this all accurate?


Comments

  • #2
    3DataModem
    Registered Users, Registered Users 2 Posts: 4,126 ✭✭✭3DataModem


    Alonso White Rump wrote: »
    Say I direct 20% of my salary to be a pension contribution. I don't have to pay the higher rate of tax on that money, but I do pay the standard tax rate on it - right?

    Say my employer offers a benefit of matching my pension contributions. That is treated as a benefit in kind, so I pay the higher rate of tax on that portion - right?

    If I opt to direct 10% of my income to a pension, then the employer's contribution is still treated as a benefit in kind and liable to the higher tax rate. I don't get the tax relief available to me for personal contributions - right?

    Is this all accurate?

    Employer contribution is not a benefit in kind provided within certain limits. Special exception for pensions.


  • #3
    Geuze
    Registered Users, Registered Users 2 Posts: 14,242 ✭✭✭✭Geuze


    Alonso White Rump wrote: »
    Say I direct 20% of my salary to be a pension contribution. I don't have to pay the higher rate of tax on that money, but I do pay the standard tax rate on it - right?

    Incorrect.

    Assuming all your pension cont comes out of salary that would otherwise be taxed at 40%, then you do get 40% tax relief on it.

    Example, single person on 50k.

    10k to pension, tax relief = 4k, net cost = 6k


  • #4
    dennyk
    Registered Users, Registered Users 2 Posts: 1,821 ✭✭✭dennyk


    Note that you do still pay USC and PRSI on your pension contributions, but you do not pay any income tax (up to the age- and income-based limits for such relief, at least).


  • #5
    s7ryf3925pivug
    Closed Accounts Posts: 4,007 ✭✭✭s7ryf3925pivug


    Good info, thanks!


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