It’s hard not to look at the taxes on your payslip and think about how much more you could be getting each month. While the burden of taxes will never completely disappear, there are quite a few ways you can save money, including some schemes and reliefs you may not have even heard of. Here are 10 ways you can reduce your tax bill in Ireland
1. Tax Saver Commuter Tickets
Introduced in 1999, this scheme is designed to encourage people to use public transport to get to and from work. Employers simply register online and purchase monthly or annual tickets for their staff, with the cost deducted directly from the employee’s gross salary.
While employees can save hundreds of euros on their commute, the scheme saves employers 11.05% on PRSI payments as the employee’s gross income is reduced. If you are a business owner and don’t currently offer this scheme, it’s easy to join online on the Taxsaver website.
2. Rent A Room Relief
If you have a spare bedroom on your property then renting it out can be a great way to get some tax-free income. To qualify for Rent A Room Relief, you must meet a few conditions. For example, the gross annual income from the rent must not exceed the exemption limit (this is subject to change, but has been at €14,000 for the past few years).
You also don’t qualify if you are renting the room to a child, partner or through Airbnb, and there are certain conditions regarding the nature of the residence. To take a look at the full list of criteria, head over to the Revenue website.
3. Pension Contributions
Pension contributions are one of the most efficient ways of saving tax. If you pay into a qualifying pension plan (including occupational pension schemes, PRSAs and RACs), then you can get Income Tax relief against earnings from your employment for maximising your pension contributions. So not only are you saving money for the future, but you are also paying less of it to the taxman. (Read our guide on pensions for small business owners)
This relief is subject to limits on not only your total earnings but also an age-related percentage limit of your earnings in any given year. To find out what these limits are and what you could be entitled to, head over to the Revenue website.
4. E-Worker Relief
If you work from home on a full or part-time basis, your employer may pay you up to €3.20 per day without deducting PAYE, PRSI or USC. This relief is designed to offset some of the cost of some of your bills that may increase with additional time spent at home, for example, your electricity, heat, and internet bill. Your employer may offer to pay more than €3.20 per day, but anything over that amount will be taxed.
Even if they do not pay, you can claim allowable expenses on your tax return. You are entitled to 10% of your electricity and heat costs and 30% of your internet bill (based on the number of days you worked at home during the year). To figure out what you can claim, you can find a formula on the Revenue website.
5. Medical Expenses
You can receive tax relief for qualifying health expenses at a standard rate of 20%. Qualifying expenses can be your own health expenses, those of a family member or any other individual’s, as long as you are the one who paid for them.
There is a long list of expenses that qualify, including IVF, acupuncture, non-routine dental care, and nursing home fees (which have a rate of 40%). You can claim relief on health expenses after the year has ended (as long as you have the receipt) and can do so on your annual tax return form.
6. Work Expenses
Also known as flat-rate expense allowances, these are costs that certain professions can claim for that are incurred as part of their day-to-day work. Qualifying work expenses help to save money on tax by reducing the amount of taxable income. They usually include things like tools, stationery and uniforms. For example, a veterinary nurse who is required to supply and launder their own uniform is entitled to claim an allowance of €400. See our guide on sole trader tax-deductible expenses.
For certain professions, you don’t even need to incur an expense to be able to make a claim. Dentists, for example, are entitled to claim €376. For the full list of professions and allowances, click here.
7. Bike To Work Scheme
This is another incentive scheme that can save employers money on PRSI payments while employees save on the costs of cycling to work. It works by the employer purchasing a bike and equipment (including things like helmets, lights, puncture repair kits, and reflective clothing) up to the value of €1,250 (€1,500 for ‘e-bikes’ and related safety equipment).
The employer will then arrange salary deductions from the employee over a period of up to 12 months to cover the cost. The repayments come out of the employee’s pay before tax, USC and PRSI are deducted, making for great savings for both parties.
8. Tuition Fees
If you are attending an approved undergraduate, postgraduate, IT or foreign language course, you may be able to claim tax relief for fees up to €7,000. As the relief is available to the person paying the fees rather than studying, you can claim tax back on your child’s tuition fees as well as your own.
There is a €7,000 limit per course, per person, per academic year, though each claim is subject to a single disregard amount of €3,000 (for full-time courses) or €1,500 (for part-time courses) each tax year. There is also no relief available for things like exam and administration fees.
9. Aged 65 or Over? Age Tax Credit & Income Tax Exemption
Once you, your spouse or civil partner are over the age of 65, you are entitled to an additional tax credit on top of your personal tax credit. If you are single or widowed, in 2021 you are entitled to a €245 tax credit, while if you are married or in a civil partnership you can claim €490. To start claiming this tax credit, simply get in touch with Revenue.
10. Consider Starting Or Investing In A New Business
There are a number of reliefs available as incentives for entrepreneurs and investors, including Start Up Capital Incentive (SCI), Employment Investment Incentive (EIIS) and, Start Up Refunds for Entrepreneurs (SURE). Though they each work in different ways, if you make qualifying investments in qualifying companies you may be able to claim income tax relief on the amount you have invested or get a refund of income tax that you paid in previous years. To find out more about each relief and if you are entitled to claim, head over to the Revenue website. You may also want to read our post on voluntary redundancy schemes as well.
Conclusion
Everyone would like to save money on their tax bill, but it’s not always easy to know what options are out there and which savings apply to you. No matter what your circumstances, we can offer personalised advice to help you reduce your tax bill in Ireland.
Our talented SCK Group team have years of experience offering accounting services and financial planning advice, equipping you with the knowledge you need to get more out of your money. If you’d like to get in touch to arrange a preliminary consultation, please head over to our contact page and we’ll get back to you as soon as we can.
