Last minute AVC advice

Zipppy

Hi
A wee bit of advice on last minute AVC please as regards the amount of tax back that can be claimed...

Can you only claim back an amount equal to or less than the amount of tax you paid in the previous tax year?
or can you max out to the total amount you are entitled to under revenue tax free lump sum rules even if this exceeds tax amount paid in previous year?
Zip

coylemj

Zipppy wrote: »

Can you only claim back an amount equal to or less than the amount of tax you paid in the previous tax year?

Yes, the most tax relief you can claim is what you already paid in tax. But bear in mind that your AVC fund accrues capital gains and dividends free of tax so it's a very tax-efficient method of saving (no DIRT or CGT). With the downside that you can't touch the money until you retire.

Zipppy wrote: »

..... can you max out to the total amount you are entitled to under revenue tax free lump sum rules even if this exceeds tax amount paid in previous year?

To benefit from the tax-free treatment of the AVC fund (see above), yes this would make sense. But there would be no benefit in doing so on the eve of retirement because once you have contributed enough to claim back all of the tax paid, every extra €1 you put into the AVC will cost you a net €1 (no tax relief) and will come straight back as €1 within the tax-free lump sum.

And if you manage to exceed the maximum tax-free lump sum, you may end up paying tax to get that last €1 back or you may have to leave it in an ARF.

sensitive1960

Up until 31st of October you can offset AVC against 2017 tax liability.If you were retiring this year you could also offset AVC against 2018 tax bill.
In limited circumstances you can deliberately overfund AVC for example if 40% tax payer while working and a 20% or 0% taxpayer when retired.