How to claim ALL of your tax back
Changes to USC and other tax changes announced last October will be felt in your pocket this month
Every single person in the country will be hotly anticipating their first salary of the year dropping into their bank accounts this week… perhaps only to see it disappear out again to pay for Christmas excesses.
This is the first month that we will see the benefit of the pre-election budgetary changes announced by Finance Minister Michael Noonan last October, but you might have already forgotten what they were. So, here's a round-up of what we can expect to see, and this time around, there was something for everyone, meaning that we should all see a little more money coming our way, even if it's still not enough to pay for all those generous gifts we gave!
The main changes are around tax, specifically Universal Social Charge. The main income tax rates of 20pc and 40pc were unchanged this year, but as USC applies to total income (like a levy), the reductions across three of the four bands will be significant.
Last year's levels were 1.5pc, 3.5pc, 7pc and 8pc at different bands of income, depending on earnings with only those earning less than €12,000p.a. being exempted. Everyone will see a reduction from this month. The bands themselves haven't changed, but the tax is reduced across the board to 1pc, 3pc and 5.5pc with the 8pc band unchanged, respectively.
An unfair quirk of the system means that if you earn less than €13,000p.a. in 2016 you pay no USC at all, but if you earn €13,001, you pay USC on the lot! It means that those 'just over' this figure pay a disproportionate amount. However it levels out once you earn over €13,155p.a., says Barry Flanagan of Taxback.com. Compare your payslip with your December one to see the real difference. Around 700,000 workers will not pay USC as they don't earn enough or are over 70 with incomes below €60,000p.a.
The minimum wage has increased from €8.65 per hour to €9.15 per hour from 1 January. For someone working a 40-hour week, it means their annual income rises from €17,992 to €19,032. However, this will tip them into the tax net (some for the first time), so the increase is diluted. In net terms, they will now earn €17,927.16p.a. or €623.05 more, an upswing of 3.6pc, which will be welcome for the lowest of earners.
This universal payment has increased by €5p.m., per child and will be reflected in January's payment either from the post office, or by direct debit. It may not be much, but will be welcomed by families nonetheless. It remains tax free and payable until children are 16 or in full-time education to 18. GP visits will also be free for children under 12, but not until later this year, possibly October as negotiations continue with GPs.
Pensioners did well, relatively, in this budget and will see changes on two counts: State pensions increase by €3 per week while the fuel allowance will be increased by €2.50p.w. to €22.50p.w. As fuel prices have dropped a lot over the course of 2015, this is a real net increase for them.
Carers will see the Respite Care Grant, so cruelly slashed in recent years, restored to €1,700. Its purpose is to allow the carer to take a break from their duties but many use it to fund bills and make up money lost through their inability to do other, better-paid work. Carers aged 66 and over will also see a €3 increase in their income.
Don't forget, while you're paying a little less tax this year in the form of Universal Social Charge, it's a timely reminder that Revenue allows you to back-claim on taxes for up to four years. There are dozens of credits and reliefs that go unclaimed every year, worth millions of euro because people simply don't know they're available, or think it's too difficult to claim. In 2013 for example, €151m was refunded just in medical expenses with €21m returned to taxpayers shelling out for third-level fees. Lots more wasn't.
In fact, it's very straightforward to claim these (and kudos to Revenue for seriously enhancing their customer service in recent years), and most of the work can be done online. Claims typically take two-six weeks to process so January is a good time to do it, right back to 2012. Revenue has a range of specific leaflets and claim forms in the 'Popular Forms' tab on its website, revenue.ie, along with 'Reliefs and Exemptions' in its PAYE section (see table).
Their website is much improved but citizensinformation.ie also has an excellent guide to taxes and reliefs. The alternative is to use an accountancy company which specializes in this, such as Taxback.com or RedOaktaxrefunds.ie which take a commission from the refunds they secure for you. They claim average refunds secured of over €800, so if you think you're due what is essentially an over-payment to Revenue back, consider that option.
The key areas to claim relief on are medical bills, pensions, elder care and renting a room out. However, there are some fairly obscure ones in there too - for instance, if you do a job which requires a uniform, special tools or protective clothing, or even 'nice' clothes you need to purchase, you can claim a Flat Rate Expense for it. Some examples in the exhaustive list include:
Hotel Porter: €90
Waiter: €97, but a waitress only €64
Shop assistant: €121
Nurses who supply/launder their uniform: €733
Other popular reliefs include:
Available on all un-reimbursed expenditure (i.e. not paid by health insurance), including procedures, doctors' visits and also the €144 limit under the drug payment scheme. You don't need to show receipts, but should keep them if asked. There is no excess.
Although the initial Student Contribution (€3,000) is exempt, all further fees are tax deductible at 20pc up to €7,000 per person p.a., whether it's a private or public college and includes mature students. The initial exemption only applies per family, so those with more than one child at third level can apply for the lot.
This has been abolished now, but if you were in rented accommodation on 7 December 2010 you will continue to qualify until 2017 for relief on a reducing basis.
This is NOT just someone caring for an elderly person or someone with a disability, it includes all stay-at-home parents with children under 18 who often don't realise they can claim it. It amounts to €1,000 in 2016 and you can have earnings up to €7,200p.a. and still qualify.
One of only two reliefs (the other being elder care) which is available at the top rate of tax. While your employer should be deducting the correct amount, don't assume it, especially if you're making Additional Voluntary Contributions (AVC) in addition to your pension. You may have to claim the relief on this separately as it is age and premium based.
Whether it is you or a relative who is being cared for, institutionally or at home with an employed carer (directly or through an agency), you are entitled to full tax relief on the amount. It is extremely generous, up to €75,000p.a. Crucially, it can be claimed by whomever is paying the bill; i.e. if this is an adult child who is a top rate taxpayer they get relief at 40pc. It must be claimed in the year of the expense, and unlike other reliefs, can't be back-dated.