Both your PAYE and self-employed clients can reduce their 2015 tax liabilities by making a pension contribution now and backdating the relief to 2015.
Tax Deadline Dates 2016
The extended deadline for self-employed clients this year is 10th November 2016. Clients who both pay and file their tax returns through the Revenue On-line Service (ROS) have until this date to pay a pension contribution and elect to backdate the income tax relief against the 2015 tax year. Those who do not qualify for the ROS extension must pay and file their tax returns by 31st October 2016.
Additional Voluntary Contributions (AVCs)
PAYE employees can make Additional Voluntary Contributions (AVCs) and backdate the tax relief on pensions contributions to the 2015 tax year, if they pay a pension contribution and elect* to backdate by 31st October each year. This applies to AVCs paid to occupational schemes as well as AVC PRSA contributions.
If your client chooses to backdate the relief, the contributions will be included in the 2015 percentage and against the client’s 2015 salary.
According to the tax relief limits table the client is entitled to tax relief of 20% of salary, up to a maximum of €115,000 in any one tax year. This means the client in question is entitled to pay and elect to backdate another 10% of his 2015 salary and still get the full relief.
Note – the “pay and elect to backdate” cannot be based on the higher 2016 salary.
* Elect means that the member must inform their local inspector of taxes that they will be making a pension contribution by 31/10/2016 and will be claiming the tax relief in respect of the 2015 tax year.