Pensions Tax Relief for Doctors GMS & Private Income

23 September 2010

Clarification for 2009 Relief

In response to criticism of ambiguity surrounding  the issue of tax relief on persons with self employed and employed income , the Revenue have confirmed the following transitional arrangements for contributions to personal pension policies or PRSA's entered into before 7 September 2010.

If the contribution was actually paid in 2009, or was paid before 7 September 2010 in respect of 2009 (i.e. the taxpayer elects before the 2009 filing date, to have the contribution treated as if it was paid in 2009) then the Revenue will allow the old rules

To recap on the issue in question, readers may recall from our previous article, Tax Briefing 74 issued by the Revenue Commissioners in September 2009 set out the operation of the new rules for individuals who have income from employment and self employment.

  New rules for tax relief

In essence Revenue have removed the potential for such people to maximize the tax relief on pension contributions in respect of each source of income (see table below).

 

Age

Contribution of

 Net Relevant Earnings

Max Contribution

Up to age 30

15%

€22,500

Age 30-40

20%

€30,000

Age 40-50

25%

€37,500

Age 50-55

30%

€45,000

Age 55-60

35%

€52,500

Over age 60

40%

€60,000

 

Previously the annual earnings cap of €150,000 on which tax relief would be granted, applied to income from employment and self employed income.  In effect therefore, a person in this position could utilize two annual earnings caps as follows;-

 

Example - Doctor age 54 two sources of income             Old Rules

Occupational earnings €180,000        Earnings cap   €150,000         Tax relief @30% =€45,000

Self employed earnings €160,000      Earnings cap   €150,000         Tax relief @30% =€45,000

 

The new rules mean that a single earnings cap of €150,000 applies to all income.  Furthermore they require the allowance to be fully utilized on occupational earnings.  If for example your occupational plan requires a mandatory member contribution of say 5% of earnings, then the next 25% of relief (in this example) must be claimed on an additional voluntary contribution to the occupational scheme leaving no scope for relief on pension contributions in respect of self employed earnings.

 2010 Relief

For the 2010 tax year relief will not be granted on such arrangements