The benefits of toping up your pension?
Did you know you can get up to 40% tax back if you top up your Pension with a Lump Sum?
It’s that time of year again and you may hear people talking about being able to claim some tax back on their pension payments but you are not sure how it works! The way you do it is by personally making a top up pension contribution by the 31st October 2019 tax deadline and you may be able to reduce your tax liability for the 2018 tax year or be entitled to a refund of some Income Tax you paid in 2018.
Lets look at an example:
Say you are in the marginal tax bracket (paying 40% Income Tax) and want to top up your pension with a lump sum contribution of €1,000:
- Pension pot topped up with €1,000
- Claim your tax back €400
- Actual cost to you €600
For those who pay Income Tax at the 20% rate, the refund will be €200 for every €1,000 contributed to a pension plan.
*Contributions are subject to age-related limits and an earnings cap of €115,000.
*Entitlement to tax relief is not automatically guaranteed and a claim for tax refund is not guaranteed to be successful.
*Tax refunds are claimed by informing Revenue by 31st October 2019 that the tax relief on the contribution paid by this date is to be backdated to 2018. If you use the Revenue Online Service (ROS) to both file your tax returns and pay your taxes you have until 12th November 2019 to file and pay for 2018.
What does that mean for you?
In the example above, your pension pot gets the full €1,000 top up, which is invested until you retire. You claim tax back at your marginal rate of 40% which is €400 into your pocket or that can be offset against tax liabilities you may have for 2018. So, it will actually only cost you €600 to top up your pension by €1,000 with this tax saving.
What are the next steps?
Call one of our Advisers in HC Financial on 091 788000 or email us on firstname.lastname@example.org and we will talk you through the next step.
Don’t delay as the deadline is fast approaching!
Talk to us today top up your pension and save!
Tel: 091 788000. email@example.com
Read more about HC Financial Pensions & Retirement Planning
For more information also see https://Revenue.ie