October is an ominous month. The Budget’s up on the 12th, and spooky Halloween celebrations coincide with the deadline for tax returns.
hile Revenue wants to claim all they’re due from you, it works both ways, yet millions of euros goes unclaimed every year because people don’t realise they’re entitled to money back for expenses they incur.
Completing a tax return is the easiest way to make sure the money isn’t just flowing in one direction. Here’s what you need to know
Who has to submit a tax return?
For PAYE employees, tax, PRSI and USC is deducted at source and returned to Revenue every month. Included in this may be tax relief you’re allowed on a pension or health insurance premium. But it isn’t up to your employer to know you’re entitled to other reliefs or credits, nor is it their job to claim it for you. To do that, you must ask Revenue for it, and declare any other income you might have (eg a second job, share dividends, rental income etc). Even if you are entitled to money tax free – for example from an approved scheme or investment – you still must declare it.
How do I make a return?
Set up a MyGovID or ROS account (if self employed) with Revenue. There are two main types of return – Form 11 and Form 12.
“The main thing to remember is Form 12 and Form 11 are not hugely different and neither should be seen as a scary form,” says Marian Ryan of Taxback.com.
Form 11
It’s 42-pages long, but the good news is the vast majority of it won’t apply to you. You may end up only filling in the first section (your personal details) and perhaps one or two others relating to specific deductions. So don’t let its length put you off.
A PAYE worker with non-PAYE income needs to file a Form11 when their total gross non-PAYE income is in excess of €30,000, or Net Assessable income is in excess of €5,000, or if they have non-PAYE income less than €5,000 and do not have it taxed at source already.
Form 12
The good news is, it’s only 20 pages! But again, much of it may not apply to you. This is completed by someone whose main source of income is PAYE employment or a pension or a company director who pays tax under PAYE.
If your assessable non-PAYE income is less that €5,000 per year you can declare this income on a Form 12 tax return and have this coded into your tax credits.
What’s on it? Your personal details, and that of your spouse, including your PPS number.
All forms of income (including Covid payments like PUP and TWSS), pensions, investments, rental income etc must be declared.
Tax exempt income like earnings from the Rent a Room scheme are in section G.
The rest of the form is for all the credits and tax reliefs you can apply for. Sections for medical and dental expenses are there, but so are things like covenants, foreign income, redundancy payments, deposit interest, spousal and maintenance payments and capital gains and gifts/inheritances (see below).
Most people can ignore most of these most years. There’s no need to complete the sections that don’t apply, but it’s worth having a look to see if they do.
Claiming back tax
There are a number of popular ways to get money back.
Medical expenses: These are allowed at 20pc against all GP and consultant visits, medicines (including the drug payment scheme contribution of €114 pm), medical aids, even foods required for coeliacs or diabetics, that is not covered by medical insurance. Add the whole lot up, and fill in the relevant section on the form. You don’t need to send in receipts, but you should keep them in case you’re asked.
Pensions: By far the most valuable tax relief around. Your company may already calculate this for you, but if you’re making an Additional Voluntary Contribution (AVC) over your employer’s requirement you are allowed either 20pc or 40pc back on it up to (generous) limits based on the amount and your age. Always ask if your employer is claiming your full deduction; if not, do it yourself in the appropriate section.
Tuition fees relief: If your child went to college last year then you may get something back on those fees. You’re allowed 20pc back on expenditure between €3,000 and €7,000 per student, per year. While the first €3,000 of the claim is disregarded, this is a family limit so any further spend, up to €7,000 per course, is permitted
Home carer tax credit: if you’re married and your spouse is a stay-at-home parent you can claim up to €1,600 credit.
Flat rate expenses: If you do a job which requires a uniform or special tools then you can claim a flat fee based on your occupation.
Revenue holds a spreadsheet of these by job. For example, a home help can get €256, a nurse up to €733 etc.
Working from home: If you worked from home during 2020 you’re entitled to claim 10pc off your utility bills.
Alternatively, your employer can pay you up to €3.20 per day tax free.
The vast majority of tax reliefs and credits can be claimed back for four years.
Gifts and gains
Many people, perhaps only at a couple of times in their lives, make a gain from selling something, or receive a gift or inheritance from someone else.
All of these may be subject to tax, and it’s important to declare it. In some cases, there are generous reliefs, in others you may find yourself selling the very thing you receive in order to pay the bill.
Capital Acquisitions Tax
Also known as Inheritance Tax, this is applied on gifts or inheritances received during your lifetime from any source. The tax is currently 33pc. There are tax-free thresholds depending on the relationship with the person giving you the gift (the disponer). It doesn’t matter whether it is money, property or other items. It must be valued on the open market and tax paid on anything over the allowable threshold. The thresholds are cumulative from each ‘group’.
So, if an aunt (group B) gifts you €10,000 and the tax free threshold is €32,500, then you can only receive up to €22,500 in the future from anyone else in that group (other relatives, including siblings). Small gifts up to €3,000 a year are disregarded, as are gifts to pay for weddings, college etc.
Capital Gains Tax
If you make a profit on the sale of something you own, apart from your principal private residence, CGT of 33pc is due. There is an annual exemption for the first €1,270. If you’ve made losses on other sales, you can offset gains against them, according to certain rules.
