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Lump sum pension payment and income tax

  • 02-11-2020 2:16pm
    #1
    justo
    Registered Users Posts: 242 ✭✭


    I'm trying to get my head around a pension issue and could do with some help...

    I'm a PAYE employee. This year I had some additional income (approx 5k) and will have to pay income tax on this next year.

    I have a DB pension and was going to use the money to buy a year's notional service. I pay tax at the marginal rate.

    If I use this money to pay a lumpsum into my pension do I still have to pay income tax on the 5k?

    TIA


Comments

  • #2
    brisan
    Registered Users, Registered Users 2 Posts: 2,242 ✭✭✭brisan


    justo wrote: »
    I'm trying to get my head around a pension issue and could do with some help...

    I'm a PAYE employee. This year I had some additional income (approx 5k) and will have to pay income tax on this next year.

    I have a DB pension and was going to use the money to buy a year's notional service. I pay tax at the marginal rate.

    If I use this money to pay a lumpsum into my pension do I still have to pay income tax on the 5k?

    TIA

    You can claim tax relief at your marginal rate on any pension payments
    You will have to pay USC and PRSI on the 5k


  • #3
    coylemj
    Registered Users, Registered Users 2 Posts: 25,479 ✭✭✭✭coylemj


    brisan wrote: »
    You can claim tax relief at your marginal rate on any pension payments
    You will have to pay USC and PRSI on the 5k

    Not necessarily 'any' pension payments.

    For the age category you fall into, there is a % limit of your gross earnings which can be paid into your pension and qualify for tax relief.

    Click the link below and scroll down to 'Age-related earnings percentage limits'....

    https://www.revenue.ie/en/jobs-and-pensions/pensions/tax-relief-for-pension-contributions.aspx


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