You may already know, that investing in a pension has many advantages. It allows you to save properly, can protect your funds from inflation, and possibly increase your wealth over time.
Today we are going to talk about tax relief on pension contributions that you make every year.
What does it mean?
When you use part of your income to contribute to your pension, Revenue doesn’t include that amount of money when they calculate how much you will be taxed. In other words, the money that you use for your pension contributions every month is not included as part of your total income. Therefore, since you earn less, you pay less taxes. It also means that you pay less taxes than you would’ve if you had not made contributions to a pension.
How does it work?
The two main things that influence tax relief on your pension contributions, are your age and how much you get paid. As you get older, the amount of tax back you will get on your pension contributions increase. The percentage limit is the maximum percentage of your salary that you can invest in your pension and still get tax relief on.
When Revenue calculates your taxes, the first €35,300 that you earn will be taxed at 20% and everything over that is taxed at 40%, (but there are other tax bands for married people, for example).
You should also know that pension tax relief is subject to a salary threshold, which is €115,000. It means that only contributions deducted from the first €115,000 of your annual income are eligible for tax relief.
Example: 45yr olds, Susan & James, who earn €115,000 and €200,000, will both get tax relief of the same amount, since €115,000 is the limit.
Tax relief on pension contributions in practice
How can we help you?
Our qualified financial advisors will help you find new opportunities and assess your pension situation. Get in touch now.
What we do:
- Help you set up a pension for free
- Review your old pension and help you change if necessary
- Check your current pension and see if they are at your best advantage
- Evaluate if you can invest more money for your retirement
- Help you turn your pension into income at retirement
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Income Tax relief is not guaranteed. You can get tax relief if your income is taxed under Schedule E or Schedule D (case I or II).