Lifestyle

Sunday 13 July 2014

Three simple ways to cut your tax bill

We're all paying through the nose in tax thanks to the last seven austerity Budgets. Many of us are now paying more than half of our salaries in tax – and once the upcoming property tax and water charges kick in, we'll find it even more of a struggle to make ends meet. At times like this, it makes sense to do whatever you can to slash the amount of tax you pay each year. So how might you get one over on the taxman?

HIRE YOUR KIDS

In Dallas, the Ewings did their utmost to keep their business in the family – despite the tumultuous family feuds. While family conflicts can play havoc with a business, there are many advantages to getting your family to roll up their sleeves.

If you run your own business, paying your children a legitimate salary to help out with the business could save you thousands of euro in tax a year, according to expert Cathal Maxwell, who runs the tax-saving website, www.paylesstax.ie. You will need to register as an employer if you do this, but it could be well worth the hassle.

"Family are often a major support for a lot of small businesses, such as farmers, small shops, restaurants, carpenters or delivery businesses," said Maxwell.

"Many children are more computer-savvy than their parents and can lend a helping hand to the business as a result.

"Let's say John is a carpenter who is great with his hands, but useless at figures and doing the books. John is married with two teenage children under 16.

"He makes an annual profit of €50,000 and his tax bill on this is about €13,000. His two children help a lot on emails, and computer matters in general, so John decides to pay them €150 each per week – a reasonable figure for what they do. After doing this, John's tax bill goes down to about €6,600 – saving him €6,400."

If you decide to hire your kids to save on tax, make sure you meet all the tax rules – or the taxman could come after you. "The employment needs to be genuine and have a commercial reality," said a Revenue spokesman.

GET HITCHED

If you have a long-term partner but haven't considered walking down the aisle yet, you could save yourself thousands of euro in tax a year by getting hitched.

"During the 1980s, it used to pay to live together rather than get married, but a lot of things have changed since then – not least how married couples pay tax," said Maxwell.

You could be in line for a tax refund in the year you get married, particularly if one of you earns substantially more than the other. Let's take a couple who got married on New Year's Day 2012. The husband earns €41,500 and the wife earns €20,000. The couple are entitled to a tax refund of about €2,100 for the year – which they can claim back in 2013, according to Maxwell.

On top of this, you could pay a lot less tax as a married person during your married life than you did when you were young, free and single, depending on how much you and your partner earns.

If the husband earns €41,500 a year and the wife earns €20,000, the couple will save €2,100 a year in tax over their married life, according to Maxwell.

BECOME A PROFESSIONAL SPORTS PERSON

If you've got what it takes to be the next Brian O'Driscoll or Padraig Harrington, it could be worth pushing yourself to go professional – as you could be on track for a tax break of tens of thousands of euro when you retire.

The generous tax relief for sports stars – which allows them to claim back 40 per cent of the tax paid on their sports earnings when they retire – is still alive and well.

The tax relief can be claimed by professional athletes, boxers, footballers, jockeys, rugby plays, cyclists and golfers, among others. It could easily give you enough to live on for a year.

If you're claiming the tax relief on match fees of €200,000, you could be entitled to a tax refund of about €33,000. If you're claiming the tax relief on match fees of €500,000, you could be entitled to a tax refund of about €80,000, according to Maxwell. You must be living in Ireland in the year in which you stopped competing to be eligible for the relief.

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