October 31st is fast approaching, and this date is important to all of us who pay tax under the PAYE system.
It is an important date as it represents the last opportunity for PAYE workers to claim back a proportion of income tax and PRSI paid in 2009. If this opportunity is not taken, it is missed forever. Furthermore, there are mutterings in the Finance Departments that pension relief may be reduced from a current maximum of 49% to 33% next year.
How it works;
1) A PAYE worker pays an extra contribution to his pension (or starts a pension)
2) He receives a tax certificate from the Pension provider.
3) He submits the tax certificate together with a declaration that he wishes to offset this contribution against 2009 income.
4) He receives a refund cheque from the Revenue.
This refund cheque can be substantial. For example if you pay tax at 41% and PRSI at 8%, then for a €5,000 extra contribution you could claim a tax refund of €2,450.
So the approximate net effect is;
Your bank account is down €5,000.
Your pension fund is up €5,000. (ignoring some small charges)
Your back pocket has a cheque for €2,450.
The latest date to make this payment and claim it back from Revenue is October 31st.
The amount of money you can contribute as this extra payment is subject to restriction. I can calculate the maximum amount and assist with all the paperwork associated with the claim to Revenue.