22 Jul 2019
We all want to keep our money in our pockets. Tax relief benefits for your financial planning policies can help.
Anyone who has been employed knows that sinking feeling of getting your payslip and seeing that huge number next to your tax contribution. All your hard-earned money, gone before you even see it. While it isn’t possible to avoid taxes, there are some great ways that financial planning can help you keep more of the money you earn.
One of the lesser-known facts about most pension options is that you can receive significant tax relief. For PRSA (Personal Retirement Savings Account)and some group pension schemes, you can get income tax relief against your earnings that are invested, including additional voluntary contributions (AVCs). Depending on the type of retirement fund you choose, you will be able to tax a Retirement Lump sum tax free, or at a very favorable rate. The remaining amount, usually moved to an ARF, is taxable.
As mentioned in our previous blog post, Executive Pensions can offer substantial benefits as well, if you are in a senior position in your business. Contributions to an executive pension, up to revenue limits, qualify for relief from income tax as well. When you retire, you are able to take up to 200,000 tax free from your investment.
In both cases, your investments are able to grow tax-free, where a standard savings deposit account would be subject to tax.
Contributions are, broadly speaking, limited on an age-based scale, increasing every 10 years between the ages of 30 and 60. This limit is based on your net income, and you can see this limit below.
|60 or over||40%|
Finally, we don’t want to overlook the tax benefits of protection policies, such as life insurance and income protection. While any payout is taxable, your monthly payment into the policy is tax deductible up to 40% in some cases. We always hope that our clients never find themselves in the difficult circumstances that require a payout, and are happy to offer the financial benefit that this tax relief can offer in the case that such a payout is not required.
We want to be clear that taxes are a very complex issue, and your specific circumstances and options may vary. We strongly suggest speaking to one of our qualified financial advisors to determine what benefits you may be eligible for, and how best to maximize your investments.