If you are self-employed you are probably looking at ways to reduce your tax. One way to do this is to contribute to a pension. You can claim back either 20% if you are on the Standard Rate Tax Band or 40% tax if you are on the Higher Rate Tax Band on the premiums. There are limits on the tax relief which depends on your age and earnings. There is also a cap on the salary you can claim your tax relief on. You also are planning for your retirement by paying into a pension. The benefits in a pension also grow tax free. You can also make a pension contribution in a year in respect of your earnings from the previous year. The contribution has to be made by 31st October or the online cut-off date (usually the 2nd week in November) in doing your tax returns online.
Limits for tax relief on pension contributions
Tax relief for employee pension contributions is subject to two main limits:
- an age-related earnings percentage limit
- a total earnings limit.
Age-related earnings percentage limits
You can get tax relief up to the relevant age-related percentage limit of your earnings in any year. This relief is only from the employment in respect of which the contributions are made.
Total earnings limit
The maximum amount of earnings taken into account for calculating tax relief is €115,000 per year.