Reducing Your Tax Liability for 2012

The tax return deadline is October 31^st or November 14^th if you are filing your tax return using the Revenue OnLine System.

Revenue will allow tax relief to be obtained on Pension contributions in order to incentivise the private individual to save for retirement.

Pension contributions added to your Pension before the October / November deadlines are allowable for tax relief and can help you to lessen your 2012 tax liability. An individual can backdate a personal contribution paid in the current year to the immediate previous tax year for tax relief purposes.

You are currently entitled to claim tax relief at your marginal rate of income tax of up to 41%.

There are a number of limits and conditions that need to be considered. The most important being a also your income. The limits are set out below:

You may only gain tax relief on your income up to €115,000. So for example, an individual aged 45 with an income of €50,000 per annum can gain tax relief on €50,000 x 25% = €12,500. However the same individual, should he or she have an income of €150,000 can gain tax relief on maximum €115,000 x 25% = €28,750

This incentive to save for retirement is one which should certainly be considered as a means of reducing your tax bill but even more importantly as a tax efficient way in which to build up your pension pot for retirement.

Remember the current state pension (payable from age 66-68 depending on your age), is only €11,960 per annum so it’s vital that you have some other form of income when you decide to stop working.