Invest in your pension before 31 October to get tax back. With the 2020 tax deadline just around the corner, why not take the opportunity to top up your pension and claim tax back?
2020 has been a challenging year and now more than ever it is time to think about planning for the future.
An Additional Voluntary Contribution (AVC) can help you make the most of your pension contributions by giving you tax back for a one-off, lump sum investment in your pension.
To qualify for tax back however, you have to make your AVC by 31 October 2020 to claim the tax back for the previous year.
Invest In Your Pension, To Get Tax Back
Let’s look at the following example. If you are in the marginal tax bracket (paying 40% income tax) and want to top up your pension with an AVC of €1,000:
– Pension pot topped up with €1,000
– Claim your tax back of €400
– Actual cost to you is €600
In this example, your pension has received a top-up of €1,000. This year you can then claim at your marginal tax rate of 40%, giving you tax back of €400. As a result, your pension top-up actually only cost you €600.
Bear in mind that tax relief is dependent on everyone’s individual circumstances and is not automatic. Speak to us first to find out if this option is right for you.
In challenging times like this, you can access your AVC.
In certain circumstances, company directors and the self-employed can access their AVC on a once-off basis to help run a business. Any funds drawn down are taxed at the marginal rate.
To take advantage of the tax back scheme and make an AVC you must make your lump sum payment prior to 31 October 2020. Individuals who both pay and file their tax returns through the Revenue On-line Service (ROS) have until 14th November 2020 to pay a pension contribution and elect to backdate the income tax relief against the 2019 tax year.
Talk to us to find out more
Let us guide you through the process, by it’s simply invest in your pension, it will crease your pension pot and bank balance. Get in touch with a member of our team to find out how the tax back scheme works based on your own individual circumstances. Give us a call today on 091 670 123.