Hot Topics October 2013

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Welcome!

Welcome to this issue of Monthly topics for October 2013. At Dermot Deegan & Company, we urge you to claim for everything you are entitled to. We like to make your life easier: we research, interpret and inform you on Hot Topics relevant to your finances. We love feedback and questions. What would you like to see covered in the next issue?

Talk soon and enjoy!

Dermot.

 

Summary of this issue at a glance

  • Tax reminders for this month

  • Pensions

 

Tax reminders for this month

Budget 2014

  • Budget 2014 is early with year, Tuesday 15th October 2013
  • Watch out for our ‘Topics’ Budget 2014 newsletter summarising the major changes

Personal Income Tax return 2012 deadline

  • Personal Income tax returns 2012 must be filed by 31 October 2013
  • The deadline is extended to 14 November 2013 if the tax return and any tax payable for 2012 is filed & paid via Revenue website ROS
  • Preliminary income tax for 2013 is also payable on either of the above dates

Have you remembered to claim?

  • Medical expenses not covered by private medical insurance (e.g. doctor, prescriptions, hospital, NON-routine dental Med 2 form) paid for all the family
  • Home loan interest paid  (Where No TRS relief claimed at source)
  • Private Rent allowance
  • Permanent Health Cover premiums
  • Retirement Pension Contributions
  • Third level Course / Tuition fees paid (Registration / capitation/examination fees NOT allowable)

Negligible (Capital ) Loss Relief

  • Negligible Loss Relief / Asset destroyed relief is a capital loss claim where the asset is deemed to be no value & cannot be disposed / sold e.g. Anglo shares
  • Relief must be claimed in writing in period of use or within 12 months by concession
  • The entire loss, destruction, dissipation or extinction of an asset is regarded as a disposal of that asset
  • The loss is available against chargeable gains made in same tax year or can be carried forward indefinitely against any future gains

Pensions – A Summary

 State Pensions

  • State Transition Pension payable at age 65 is to be abolished where a person reaches age 65 on or after 1 January 2014
  • Applications must be made within 3 months prior to age 65 / 66 in writing using form SPC/SPT1 available from welfare.ie
  • State Pension is taxable where recipient has other taxable income
  • State Pension (Contributory) is currently payable at age 66. Changes introduced from 1 September 2012 include:
    • A lower pension is payable to new applicants for State Pension who have a yearly average of less than 48 PRSI contributions
    • From 1st January 2021 the State Pension age is increasing to age 67
    • From 1st January 2028 the State Pension age is increasing to age 68

Personal Private Pensions

1.    Occupational Personal pensions

  • Set up by Employer
  • Either Defined Benefit (DB) scheme or Defined Contribution (DC) scheme
  • Normally contributions made by employer and employee
  • Tax relief available to employer and employees at marginal tax rate
  • From 2014 Tax relief to be capped to pensions which fund €60,000 per annum

2.    Personal Retirement Savings Account (PRSA) schemes

  • NO obligation on employer to make contributions
  • Tax relief available to employee contributions at marginal tax rate
  • From 2014 Tax relief to be capped to pensions which fund €60,000 per annum
  • From 27 March 2013, prior to retirement age, you can withdraw up to 30% of the value of Additional Voluntary Contributions (AVCs) made to occupational pension schemes and PRSAs. This applies for 3 years only (until 27 March 2016)

3.     Other Pension Schemes

  • Personal pension plans (PPP’s) / Retirement Annuity Contracts (RAC)
  • Normally applies to self- employed persons who do not contribute to Occupational or PRSA schemes
  • Tax relief available on contributions at marginal tax rate
  • Relief available against earned income (trade, profession) capped at earnings of €115,000 pa (NO relief allowable against unearned / investment income)
  • Amount relief depends on taxpayers age / as percentage of earned income
  • From 2014 Tax relief to be capped to pensions which fund €60,000 per annum

4.     Pensions – Summary of Tax issues

  1. Contributions paid into fund:

    • Tax relief available on contributions at marginal tax rate
    • Relief available against earned income (employment, trade, profession) capped at earnings of €115,000 pa (NO relief allowable against unearned / investment income)
    • Amount relief depends on taxpayers’ age / as percentage of earned income
    • From 2014 Tax relief to be capped to pensions which fund €60,000 per annum
    • Relief available against prior year tax liability in respect of additional lump sum contributions paid before tax deadline of 31 October (14 Nov) in following tax year subject to level of (capped) earnings

  2. Withdrawals from fund:

    • The maximum lifetime retirement tax-free lump sum will be €200,000 as and from 1 January 2011.
    • Amounts in excess of this tax-free limit will be subject to tax in two stages
    • The portion between €200,000 and €575,000 will be taxed at the standard rate of income tax in force at the time of payment, currently 20%
    • Any portion above that will be taxed at the recipient’s marginal rate of tax
    • State Pension taxable where recipient has other taxable income