AVC top up

Kat1170

Looking to top up AVC payments to maximize my gratuity on retirement. I am planing to do this over 5 years with Irish Life / IP&F.
I am paying tax on the high rate, not much, less than €20 most weeks. Is there any minimum amount I would need to be paying in order to get tax relief at 40% or is it a case of once you are paying ANY tax at the high rate you qualify.

Hope this makes sense. TIA

coylemj

If you are currently paying the top rate (40%) of PAYE on €20 per week, contributing that amount or more to the AVC will pull you back into the 20% band but you will only get 40% tax relief on €20 p.w., the rest of the tax relief will effectively be at 20%.

Let's say you decide to contribute €50 p.w. to the AVC. That will reduce your taxable pay by €50 p.w. on which you would have paid 20% on €30 (=€6) and 40% on the top €20 (=€8) so the tax saving will be €14 and the net cost will be €36. Any further contributions you make above that will only save you 20% tax so each €1 going into the AVC above €20 p.w. will cost you a net 80c.

Kat1170

You'd think the NI rep would have known that.

Is tax Relief only calculated weekly if payments are weekly.

I would be above the high rate cut off point by €250-€300 two weeks of every month.

Would this make any difference at the end of each year or is it just a case of unlucky.

TIA

Bubbaclaus

I think you're over complicating it. The amount you put into your pension reduces the portion of your pay liable to PAYE for the year. If that portion is at 40% then that's the saving you make. If it goes over that then you make a saving of 20% on the excess.

coylemj

Kat1170 wrote: »

You'd think the NI rep would have known that.

Is tax Relief only calculated weekly if payments are weekly.

I would be above the high rate cut off point by €250-€300 two weeks of every month.

Would this make any difference at the end of each year or is it just a case of unlucky.

TIA

The taxman will have given your employer numbers for weekly and monthly tax calculations.

It won't make any difference at the end of the year because your employer calculates your cumulative (year to date) tax liability on each payroll run and your tax bill for that week/month will be the difference between that number and what you've already paid so far that year.

Who is the 'NI rep'?

Kat1170

coylemj wrote: »

Who is the 'NI rep'?

Sorry, New Ireland representative.