The 2015-tax year started on January 1st 2015, so now is the perfect time to plan for the financial year ahead, organise your finances to reduce your personal tax liability and optimise your tax cash flow, writes Catriona Gorham.
As each individual’s tax affairs differ, we recommend that you seek appropriate advice before taking any action. This simple guide which will help you to get your finances in better order, which will go a long way in reducing your personal tax liability and optimise your tax cash flow.
The Home Renovation Incentive (HRI) will run until December 31st 2015 for landlords. The incentive provides for tax relief by way of an income tax credit at 13.5% of qualifying expenditure on repair, renovation or improvement works carried out on a main home or rental property by qualifying contractors.
Qualifying expenditure is expenditure subject to the 13.5% VAT rate.
The works must cost a minimum of €4,405 (before VAT) per property, which will attract a credit of €595 per property. Where the cost of the works exceeds €30,000 (before VAT) per property, a maximum credit of €4,050 per property will apply.
The credit is payable over the two years following the year in which the work is carried out and paid for. The first available year for HRI tax credits will be 2016 for landlords.
The works must be carried out on or after October 15th 2014 and up to December 31st 2015 for landlords. 2014 payments, made between those dates, are treated as 2015 payments for landlords. Landlords must be local property tax and household charge compliant in order to qualify under the Incentive. Landlords must also have complied with the Private Residential Tenancies Board registration requirements. Contractors must be VAT and RCT registered and tax compliant in order to qualify to carry out works under the HRI.
Thinking of expanding your workforce?
Don’t forget there are recruitment, employment schemes and assistance schemes out there to help. Some of the more popular of these are:
JobBridge is an internship scheme that will provide work experience placements for interns for a six month or nine month period. Intern receive an allowance of €50 on top of their existing social welfare payment for the duration of the internship, all payable by social protection.
JobsPlus is an incentive from the Department of Social Protection to encourage and reward employers who offer employment opportunities to the long term unemployed. Grants of €7,500 and €10,000 are available.
- Family Income Supplement (FIS)
This is a weekly tax-free payment for families, including one-parent families, at work on low pay working at least 19 hours every week.
Making pension contributions is very tax efficient, so have you planned how to maximise your tax relief?
- 40 year old
- Salary €100,000
- Contribution €25,000 (max)
|Cost to you||€|
|Basic tax relief (40%)||(10,000)|
|Net contribution of basic rate taxpayer||15,000|
Employment & Investment Incentive
Relief from income tax is available by way of a deduction from income to individuals who invest long-term risk capital in ordinary shares of unquoted companies resident in the State or resident in the European Economic Area with a qualifying establishment in the State and who are engaged in trades in the State.
This relief is subject to revenue conditions. In addition, research and development projects, undertaken with a view to the carrying out of such trades can also qualify for relief. The maximum aggregate amount of investment for which a person can get relief in any one year is €150,000 while the minimum investment in any one company must be €250.
Credits and allowances
Are you claiming all the credits and allowances you are entitled to both on your salary and/or self employments. They include:
- Rent credit
- Carers credit
- Medical and dental expenses
- Tuition fees
- Personal credits and rate bands
Husband and wife planning
Consider transferring income-producing assets to a spouse not currently utilising their personal allowance or who pays tax at a lower rate. Instead of paying tax on investment income at 40%, your spouse may pay at 20% tax.
Submit your 2014 tax return promptly
Remember that submitting your tax return promptly after the end of the tax year, does not mean that you have to pay any tax liability sooner. If you are in the Self Assessment system, there can be significant advantages in getting your tax return finalised early.
- You have longer to budget for any 2014 balancing payment and preliminary tax on account for 2015 that will be due on October 31st 2015;
- You may be due a refund of preliminary tax paid on account for 2014 if your liability is lower than previously expected – remember your payment on account will not increase by preparing your tax return early; and
- Preparing you tax return early also allows you the opportunity to plan for pension top ups or investments in to EII.
Receiving a tax repayment, while it can be a pleasant surprise, simply means that you have previously overpaid tax to the Revenue Commissioners. It is always advisable to try to manage your tax cash flow carefully to ensure that you do not pay more tax on account than you need to.
These are only a few of the areas that can be considered as you plan for the financial year ahead. Remember, it is important to seek detailed advice before taking any action.
Catriona Gorham is tax manager at ASM Chartered Accountants who have two offices in the Republic of Ireland and four in Northern Ireland.
If you wish to discuss any of the above ideas in more detail, please contact Catriona on firstname.lastname@example.org or (042) 9331637