Individuals who both pay and file their tax returns through the Revenue On-line Service (ROS) have until Thursday 16th November 2017 to pay a pension contribution and elect to backdate the income tax relief against the 2016 tax year. Those who do not qualify for the ROS extension must do this by 31st October 2017.
The Self-Employed & Proprietary Directors
The self-employed, proprietary directors (those who own more than 15% of a company) and people with non-PAYE income are required to file self-assessment tax returns under the Pay and File system with Revenue
To avoid interest and surcharges they must:
- File their 2016 Income Tax Return
- Pay any balance of income tax outstanding for 2016
- Pay preliminary income tax for 2017
Employees and directors in occupational pension schemes can also reduce their 2016 tax bill if they pay an AVC single premium on or before 31st October 2017 and file a return by 31st October 2017.
Backdating Income Tax Relief
A self-employed individual who wants to pay a personal pension or PRSA contribution and backdate the income tax relief against their 2016 earnings needs to do the following
- Pay the contribution to a Personal Pension Plan or Personal Retirement Savings Account (PRSA) on or before the return filing date, and
- Submit their tax return to Revenue on or before the 31st October/16th November deadline.
In order to claim income tax relief on contributions to a Personal Pension Plan or PRSA the individual must be “chargeable to tax in respect of relevant earnings”. Relevant earnings refer to income of individuals who are:
- Self-employed (income from a trade or profession taxed under Schedule D, Case I or II)
- Employees (Schedule E, PAYE and not a member of a company pension scheme)
- Directors of companies (Schedule E, PAYE and not a member of a company pension scheme)
Net relevant earnings are relevant earnings less charges in income (e.g. covenant payments, tax deductible maintenance payments, allowable interest) and losses or capital allowances related to the individual’s relevant earnings.
Income which is not relevant earnings includes:
- Investment Income(e.g. rental income)
- Pension income (annuity income) or payments from Approved Retirement Fund (ARF) or Approved Minimum Retirement Fund (AMRF)
Forms Required for Self Employed and Proprietary Directors
Employees also have the opportunity to pay a pension contribution and set it against their 2016 tax bill. To claim income tax relief on their pension contribution, employees must pay their contribution to the appropriate pension contract.
- This is a PRSA or Personal Pension where the employee is not a member of an employer company pension scheme
- AVC or PRSA AVC when the employee is a member of an employer’s pension scheme.
They then need to send their tax return to Revenue and notify them to backdate the pension contribution to the 2016 tax year. The relief can be given through payroll or by way of a revenue refund.