I’m a self-employed sole trader. Can I reduce my tax liability using pension contribution?

I am a self-employed sole trader and my accountant has advised me that contributing to my pension fund will help bring down my income tax liability. Can you please outline what my options are in this respect? Personal Pension Contributions or Additional Voluntary Contributions (AVC) are still the most efficient way to save for retirement and reduce your income tax bill. It is important you consider this before the next tax return deadline The income tax return deadline is October 31 or November 10 if you are filing your tax return using the Revenue Online System. Business owners who are making the pension contribution must submit the claim for tax relief to the tax office prior to the deadline. This also has the double effect of reducing your preliminary Tax payment.

Pension contributions added to your Pension before the October and November deadlines are allowable for tax relief and can help you to lessen your 2015 tax liability. An individual can backdate a personal contribution paid in the current year to the immediate previous tax year for tax relief purposes.

You are currently entitled to claim tax relief at your marginal rate of income tax.

There are a number of limits and conditions that need to be considered. The most important being your income. The limits are set out below: Aged attained during the year Less than 30 30 to 39 40-49 50-54 55-59 60 and over Tax Relief Limit (% of Net Relevant Earnings) 15% 20% 25% 30% 35% 40% You may only gain tax relief on your income up to €115,000. So for example, an individual aged 45 with an income of €50,000 per annum can gain tax relief on €50,000 x 25% = €12,500. However, the same individual, should he or she have an income of €150,000 can gain tax relief on maximum €115,000 x 25% = €28,750

This incentive to save for retirement is one which should certainly be considered as a means of reducing your tax bill but even more importantly as a tax-efficient way in which to build up your pension pot for retirement.

In addition, before making your pension payment it is also very useful for you to obtain crucial information of what fees and charges are actually contained in your existing pension policies to ensure the tax relief you get now is not eaten up in fees and charges later on.

For further information on contributing to a pension fund please contact Michael Coburn at 053 9170507 or email mcoburn@rda.ie. Jim Doyle ACMA QFA is a partner in RDA Accountants, offering full accountancy, business advisory, tax advisory and financial services | 5 Upper George Street, Wexford | Louisville House, Waterford Road, Kilkenny | | www.rda.ie RDA Wealth Ltd trading as RDA Accountants is regulated by the Central Bank of Ireland

RDA Accountants 053 9170507