How to save money on your tax bill

We get it. The last thing you want to do with your hard-earned money is hand over more of it than necessary to the taxman. Sure, we’ll pay our dues. But who doesn’t want to save a bit of money where they can? Fortunately, there are various ways to legally reduce your tax bill.

Whether you’re a self-employed individual or a company owner, these tax-saving strategies can help you to maximise your income and reduce your tax liability.

1. Claim tax relief on pension contributions

If you’re self-employed or not a member of an occupational pension scheme, you can claim tax relief on your personal pension contributions. This means that the government will add a percentage of your contribution to your pension fund, which reduces your tax bill.

For example, if you contribute €1,000 to your pension and you’re a basic rate taxpayer, you’ll receive an additional €200 in tax relief. If you’re a higher rate taxpayer, you can claim up to €400 in tax relief. The maximum amount of pension contributions that you can claim tax relief on is 25% of your income, subject to a maximum contribution of €115,000 per year.

You can also consider a PRSA – read here for more information.

2. Make use of tax credits and reliefs

Tax credits and reliefs can help you to reduce your tax liability. Some of the most common tax credits and reliefs in Ireland include:

Personal tax credit. This is a basic tax credit that is available to all taxpayers. The tax credit for the tax year 2021 is €1,650.

 

Home Carer Tax Credit. If you’re married or in a civil partnership and you care for a dependent person at home, you may be eligible for a Home Carer Tax Credit. The tax credit for the tax year 2021 is €1,600.

 

Medical expenses relief. You can claim tax relief on medical expenses that are not covered by the state or private health insurance. You can claim relief at the standard rate of 20% on the amount of medical expenses that exceed a threshold of €100 per year.

 

Rent relief. If you’re renting your home and you’re not receiving any housing assistance, you may be eligible for rent relief. The amount of relief depends on your rent and your income, but the maximum amount of relief is €2,220 per year.

 

Start-up relief for entrepreneurs. If you’re starting a new business, you may be eligible for start-up relief. This relief allows you to claim back up to 41% of the capital invested in your business in the first year, subject to a maximum investment of €1 million.

3. Take advantage of capital allowances

If you own a business, you can claim capital allowances on assets such as machinery, equipment, and vehicles. Capital allowances allow you to deduct the cost of these assets from your taxable income, reducing your tax bill.

The amount of capital allowances that you can claim depends on the type of asset and the rate of depreciation. For example, you can claim capital allowances of 12.5% per year on commercial property, and up to 100% in the first year for energy-efficient equipment.

4. Use charitable donations to reduce your tax bill

If you make a donation to a registered charity in Ireland, you can claim tax relief on your donation. You can claim relief at the marginal rate of tax. This means that if you’re a higher rate taxpayer, you can claim back up to 40% of your donation.

You can do good and save money – we call that a double win!

What next?

It’s important to seek professional advice if you’re unsure about any tax-saving strategies. There may be complex rules and regulations that you need to be aware of. By being proactive and planning ahead, you can save tax efficiently and enjoy the benefits of a lower tax bill.

If you’d like to speak to a professional about how best to plan your finances, please give us a call. You can reach us on 01 908 1500 or email us at info@metisireland.ie.