October and November are a very important time for business owners. It’s the time of year when tax returns must be filed for the previous year, but it is also when business owners can reduce their corporation tax while adding real value to their retirement fund.
Individuals who both pay and file their tax returns through the Revenue On-line Service (ROS) have a slight extension to pay a pension contribution and elect to backdate the income tax relief against the previous tax year. Those who do not qualify for the ROS extension must do this by 31st October.
The below example shows details for a company director who is 45 years of age and intends to retire at 60. His company is profitable and he has the option of increasing his annual gross income by €50,000 or funding his pension by the same amount for the next 15 year until he retires.
|Taken as salary||Pension with growth|
|Gross lump sum||€0||€239,898.25|
|Tax due lump sum||€0||€7,979.65|
|Net lump sum||€0||€231,918.60|
|Balance subject to tax||€750,000||€719,654|
|Income tax @ 40%||€300,000||€287,877.60|
|Pay related social insurance @ 4%||€30,000||€28,787.76|
|Universal social charge @ 8%||€60,000||€57,575.52|
|Total tax paid||€390,000||€374,240.88|
|Total received after tax (including net lump sum)||€360,000||€577,371|
The above example assumes a conservative growth rate of 4.3% per year with an annual management charge of 0.9%.
Warning: The above figures do not constitute financial advice.
Warning: These figures are only estimates and are not a reliable guide to future investment performance.
Warning: If you invest in this product you will not have access to your money until you are 60 years of age or until you retire.
Warning: The value of your investment may go down as well as up.
Warning: If you invest in this product you may lose some or all of you money.
Hi, my name is Paul Clements. I have worked in the financial services industry for the last 12 years, focusing mostly on investments and portfolio management.
I now serve on the Board of Directors of Dolmen Insurance Brokers Ltd., where my focus is on the company’s non-general business including life assurance, pensions and investments.You can contact me at any time at the number or email address below. I look forward to hearing from you soon.
If you want to talk to one of our specialists about any of our products or services, call us on 1890 201 603
If you require assistance with any of our products, search our FAQ or click the button below to Submit A Ticket.