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How the tax relief for water charges will work

A TAX relief is a reduction in the amount of tax owed by an individual or business entity.

It looks as if taxpayers will be able to claim tax relief from their water charges.

This will be at the lower income tax rate of 20pc.

And the most tax relief for water charges that people will be able to claim looks set to be €100.

Tax expert Barry Flanagan of Taxback.com explained that the new tax relief would lessen the amount of income tax that you owe by up to €100.

He said the new tax relief would be like a tax credit. You will not get a tax refund, instead you will owe less tax. In other words, you get a credit against the tax owed.

"The effect will be to lessen amount of tax owned. You essentially deduct the amount of tax owed from your tax bill."

This means that if your water bill is €300 a year, you will be able to get €60 off your income tax bill. This is worked out by multiplying the money spent on water charges by 20pc. So, €300 multiplied by 20pc is €60.

The water bill for a family of two adults and two children is estimated at €278, meaning they would get tax relief of €55.60.

The relief will be capped at €100, which would require a larger bill of €500.

The tax relief is expected to be available to everyone, regardless of income.

Mr Flanagan said PAYE (pay as you earn) taxpayers would probably have to notify the Revenue Commissioners about how much is payable in water charges for the year.

Revenue is likely to require proof that water charges have been paid, before providing the tax relief.

This could encourage some to pay the controversial new charge.

Those who are self-assessed for tax purposes will have to claim the tax relief on their annual tax return.

It is expected that the new tax relief will work much like the old service charges tax relief, which has since been abolished.

Charlie Weston

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