11 Aug Let’s Talk About Tax Baby
Let’s talk about tax, baby. Let’s talk about Revenue and me, let’s talk about all the money that we’re paying and don’t wanna be, let’s talk about tax.
Tax rates, tax bands, tax credits, tax relief, tax cut-off point… Oy. I don’t know about you but this whole subject is rather taxing!
Firstly lets point out all of these terms refer to income tax, so if you earn an income, it will be subject to taxation. In Ireland you’re not obligated to file an income tax return. In our opinion, everyone should file a return to avoid unnecessary bills in the future, and get any potential tax refund. You must file your income tax return for 2013 by November 2014 (if filing online). You may be able to find a tax calculator online, or use your financial advisor.
Individual’s standard rate “cut off point” depends on personal circumstances. Above the threshold attracts income tax of 41%, below that threshold is subject to 20% tax. You can amend your tax cut off points to pay less tax in certain circumstances. Perhaps your spouse went back to college and was not earning an income or half an income for a year. You can amend your tax band to reflect your personal situation more favourably.
You’re also entitled to tax credits in Ireland that subsequently reduce your potential tax bill. Credits depend on you personal situation and range from Single Person Tax Credit to Dependent Relative Credit. There are several allowances available. We can say from experience, learning all of the things you are entitled to can be like breaking into the Garda Headquarters. Difficult to say the least!
Do you homework and make sure you file your subsequent returns. Your financial advisor should review your payslip and your personal circumstances to ensure you are getting the most out of your finances.
I’ll leave you with an example:
Owen and Rita celebrated the arrival of their second child in February. Rita normally earns €35,000 per year and will only receive the maternity state benefit for 26 weeks before returning to work. Her earnings for 2014 will be €23,480. Owen earns €52,000 per year.
Currently Owen and Rita both have a “Cut Off Point” of €32,800. Meaning every euro they earn over that cut off is taxed at 41%.
They can amend their “cut off” as a married couple to €41,800 and €23,800 respectively. Since Rita has earned under €23,800, she will only be subject to 20% tax. Owen then has an additional earnings of €9,000 on the lower tax band.
That money could go a long way to paying towards crèche fees!
A call to the revenue to have a chat about your current employment situation could get your tax band sorted in a heartbeat. But if you’re still bamboozled by your own tax situation, allowances, credits and such; speak to an independent financial advisor today to ensure you are being the most efficient you can be. Keep in mind, any potential tax back longer than four years ago will be lost!