As we are coming to the end of the 2012 tax year, there a few days left to take advantage of some of the various tax reliefs and exemptions that are available until 31 December.
Were you working for all of 2012?
If you meet any of the following criteria, you may have overpaid tax and be entitled to a refund in respect of the 2012 tax year:
You have been out of work for a period during the year;
Received a redundancy payment on which you paid tax;
Returned to Ireland after a period abroad; or
Left Ireland to go abroad.
Don’t forget that there is a general four-year time limit on claims for a tax refund.
Claims for repayment for the year ended 31 December 2008 must be received by Revenue no later than 31 December 2012. If you feel that you may have overpaid tax in any of the previous four years or if you have unclaimed medical, dental expenses etc, there is still time to submit a claim for the year in question and potentially obtain a refund of the income tax paid or PRSI/levies.
Paid tax on your redundancy payment? You may be due a refund under ‘Top Slicing Relief’.
Top slicing essentially looks at your previous three-year income and the amount of tax paid. The purpose of this relief is to ensure that your redundancy payment is not taxed at a tax rate in excess of your average tax rate for the previous three years.
Your average rate of tax for the last three years is 25 per cent.
You paid tax on your lump sum (after the tax free amounts ) at 41 per cent.
As your average tax rate for the previous three years is lower than the 41 per cent tax paid on the taxable lump sum i.e. 25 per cent, you may be due a refund of the difference.
However, as a result of measures announced in Budget 2013, Top Slicing Relief will no longer be available from 1 January 2013 on ex-gratia lump sums in respect of termination and severance payments where the non-statutory payment is €200,000 or over.
Capital Acquisitions Tax –Utilise your annual exemption of €3,000:
There is an annual gift exemption of €3,000 from capital acquisitions tax and this does not absorb into the recipient’s lifetime tax-free threshold. For example, a child could receive €3,000 from each parent tax free without affecting the child’s tax-free threshold for the future. As the threshold was reduced by ten per cent in Budget 2013, from €250,000 to €225,000, it makes sense to maximise this annual exemption.
Capital Gains Tax – Utilise your annual exemption of €1,270
An individual is entitled to an annual exemption of €1,270 (single person) for capital gains tax purposes, i.e. if your chargeable gains for 2012 does not exceed €1,270, no tax is payable. If your gains exceed €1,270, only the excess is subject to tax. Therefore, disposals could be timed before the end of the month to take advantage of the annual exemption for 2012.
The above information should be treated as a guide only. If you would like assistance with your tax affairs, contact Coll & Co Chartered Accountants, Barna by phone on 091-592080 or by email at email@example.com. Coll & Co specialises in personal tax and pensions advice.
Coll & Co, Chartered Accountants is regulated by the Institute of Chartered Accountants to provide investment advice. If you want to subscribe to Coll & Co’s free monthly newsletter, log on to www.coll.ie and fill in the details.