THIS THURSDAY IS tax filing day for those making their returns online. This annual obligation extends far beyond large corporations and business owners with freelancers, sole traders, proprietary directors, accidental landlords and even certain employees required to file returns.
Missing this deadline can result in significant penalties and interest charges, making it essential for everyone who is liable to file their taxes correctly and on time.
To make things a bit simpler, below are seven key tips to help you navigate the tax filing process in Ireland. These practical suggestions will ensure you don’t miss out on potential tax reliefs and credits that could reduce your overall liability and will make your tax filing experience far less stressful.
Flat Rate Expenses are a form of tax relief available to employees in specific sectors who incur costs as part of their job. These costs might include tools, uniforms or other work-related equipment. The amount you can claim varies depending on your occupation, as Revenue sets a fixed amount for each category of work. For example, healthcare professionals, teachers and mechanics all have designated flat-rate expenses that they can claim.
To make the most of this relief, check if your job category qualifies for a flat rate expense. You can do this by visiting the Revenue website or consulting with a tax advisor. Many employees are unaware of this entitlement and miss out on valuable tax relief.
Once you confirm your eligibility, include this claim in your tax return — it’s a straightforward way to reduce your taxable income. Make sure to keep records of any related expenses, even if they are covered under the flat rate category, as Revenue may request evidence if your claim is audited.
Medical expenses are another often-overlooked area where taxpayers can claim relief. You can receive a tax rebate on qualifying medical costs not covered by insurance or other reimbursements. These expenses include GP visits, consultant fees, prescriptions, dental treatments (like orthodontics) and even some alternative therapies if prescribed by a medical practitioner.
The tax relief rate for medical expenses is currently 20%, which can significantly reduce your tax bill if you or your family had substantial healthcare costs during the year. Be diligent in gathering receipts and documentation for all your out-of-pocket medical expenses. If you forget to claim these on your current tax return, you can go back up to four years to amend your previous filings, potentially recouping a substantial amount of tax paid.
If you’re contributing to a personal pension or PRSA (Personal Retirement Savings Account), it’s vital to claim the associated tax relief. These contributions are an excellent way to reduce your taxable income while simultaneously securing your financial future. The relief is granted at your highest rate of tax—either 20% or 40%, depending on your income bracket.
To ensure you claim this relief, make sure your contributions are reflected in your tax return. If you’re contributing directly through your employer, this is usually done automatically via payroll. However, if you are making personal contributions outside of payroll, you’ll need to include this in your self-assessment.
Not only does this reduce your tax liability, but it also incentivises you to save for retirement. Remember, there are annual limits on the amount you can contribute, which vary by age, so keep this in mind when planning your contributions.
Tax credits directly reduce the amount of tax you owe, making them more valuable than deductions, which only reduce your taxable income. It’s crucial to be aware of the various tax credits available to you and ensure you are claiming everything you’re entitled to. Some common credits include the Personal Tax Credit, PAYE Tax Credit and the Home Carer Tax Credit, among others.
In recent years, additional credits have been introduced, such as the Dependent Relative Tax Credit and the Age Tax Credit for those over 65. If you’re married or in a civil partnership, you may also benefit from the Married Tax Credit or the Single Person Child Carer Credit if you are a single parent. It’s worth reviewing your eligibility for all available credits each year, as claiming them can substantially reduce your tax bill. Use Revenue’s online guides or consult with a tax professional to make sure you’re not leaving money on the table.
The Irish government has introduced several new tax credits in recent years to alleviate financial pressures, especially in the housing market. Notably, the Rent Tax Credit and the Help to Buy scheme are significant incentives that taxpayers often forget to claim.
The Rent Tax Credit, reintroduced in 2023, allows tenants to claim up to €500 (or €1,000 for jointly assessed couples) per year on rent paid for their primary residence. This is particularly beneficial for renters in high-cost areas, providing some much-needed financial relief.
A new relief in 2023 is the Mortgage Interest tax credit, which is a relief of 20% on increases in Interest paid on Principal Private Resident Mortgages. A tax credit of 20% is allowable on the increase in Interest paid between 2022 and 2023.
Additionally, if you’re a first-time buyer purchasing a new home, you can avail of the Help to Buy incentive, which offers a rebate on income tax paid in the last four years up to €30,000. This credit can significantly boost your savings when buying a property, making it a vital benefit to claim if you are eligible. Both these credits are easy to overlook so take the time to explore your options fully.
If you’re renting out a property, either as a full-time landlord or an accidental one, it’s essential to understand the tax implications and available reliefs. Rental income is taxable, but you can offset this with various deductions such as mortgage interest, maintenance expenses and repairs.
Also, if you have incurred a loss in a rental year, this can be carried forward to reduce your tax liability on future rental income. Keeping detailed records of all rental-related expenses is crucial for maximising these reliefs. Be mindful of recent changes in tax regulations regarding rental properties, as these can impact your overall tax position.
For self-assessed taxpayers, it’s not just the filing of last year’s taxes you need to worry about but also the payment of preliminary tax for the current year. Preliminary tax is essentially a payment for the current tax year and must be at least 90% of your final liability for the year or 100% of your previous year’s tax liability, whichever is lower. Failure to pay sufficient preliminary tax by the deadline can result in interest charges.
To avoid these penalties, plan your cash flow to ensure you can cover both your final tax bill and your preliminary tax. Consider setting aside a portion of your income each month to meet this obligation.
Hopefully, these tips will make the process of filing a little less stressful. And remember, seeking professional advice or using Revenue’s online resources can ensure you stay compliant and take advantage of every available tax relief.
David Quinn is Head of Business Growth at business advisory firm Nexiō.
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