Do I owe National Solidarity Bonds tax?
Your questions answered
Q: I own a number of 10-year National Solidarity Bonds. One was bought in 2010, another in 2011 - and another in 2016. I had always thought that the interest earned on the bonds was tax-free but a friend has advised otherwise. Do I need to pay tax on any interest earned on these bonds? Richard, Fairview, Dublin 3
Some of the National Solidarity Savings Bonds are partially taxable. You should be issued with a statement of the bonds you hold and this will include reference to the tax position. Details can be found on the website (statesavings.ie).
Depending on which issue of bond you hold, the annual interest may be liable for DIRT but the bonus payable at the end will be tax-free.
Is prize money taxable?
Q I'm a PAYE worker and I work in advertising. Last year, I won €2,000 in prize money in a competition run by an advertising body (which is not my employer). I won the money because an ad I produced won best prize in a particular category. Do I need to pay tax on this €2,000? Also, do I need to declare this prize money in an annual tax return?
It is not clear how your prize arose - in that was it part of your job, or was the advertisement that you submitted part of your normal work?
Assuming you entered a public competition and are not connected in any way to the company paying the award, then it should not be taxable as income on the grounds that you were doing this in your personal capacity and not as part of a business activity which provided some form of benefit for you or your employer within the advertising industry. Unfortunately like a lot of things in tax, it is not clear.
If it were taxable, you are under the income limit of €5,000 for having to make a self-assessment tax declaration. However this does not mean the income (assuming it is income) is not taxable. If the Revenue request you to make a tax return, you would have to include it on your tax return and pay tax on it.
Though Revenue's website says PAYE earners do not have to make a tax return unless requested to do so (provided you are not taxable under self assessment), should you earn a small amount of income outside the PAYE system, to avoid filing a return, you must typically come to an arrangement with Revenue to have the income tax on the extra earnings paid through the PAYE system.
In such cases, Revenue would typically agree to reduce your tax credits and tax rate band by an amount equal to your other income - and no tax return would be required (unless specifically requested by Revenue).
Tax relief on PRSA savings
Q I've been self-employed since 2016 so this will be my first year filing my tax return. I opened a PRSA in 2016 and I paid contributions into that PRSA in 2016 - as well as in 2017. When filing my 2016 tax return this year, can I claim tax relief for PRSA contributions made in 2016 and 2017? Sorcha,
Emyvale, Co Monaghan
There is a facility for back-dating claims in respect of pension contributions. When completing your 2016 tax return, you should be claiming for all pension premiums paid during 2016. Then depending on your income level and allowability of tax relief on pension premiums, you could also include pension contributions paid during 2017 (up to October 31, 2017) on your 2016 tax return.
The maximum amount you can claim pension tax relief for in any tax year is age-related and subject to an earnings limit. Furthermore, there is a €115,000 cap on the maximum annual earnings that pensions tax relief can be claimed on. So for example, if you are under 30, you can get tax relief on 15pc of earnings (subject to a maximum allowance of €17,250); and if you are under 40 years of age, you can get tax relief on 20pc of earnings (subject to a maximum allowance of €23,000). The amount of tax relief that can be claimed rises with age, with the maximum relief set at 40pc of earnings (subject to a maximum allowance of €46,000) and available to individuals aged 60 and over.
By way of example, I will assume you are under 30 and had a taxable self-employed profit of €40,000 in 2016. In this case, the most pension contributions you can claim for tax is €6,000, which will save you €2,400 in tax.
Making pension contributions now to be claimed against the 2016 tax year also helps reduce your 2017 preliminary tax payment requirements. Using my example, you can also reduce your 2017 preliminary tax payment by €2,400. However to maintain this 2017 tax relief, you must make at least the same amount of pension payments again for the 2017 tax year.
Tax relief for pension contributions is only available on earned income (that is, salary or self-employed income). Pension tax relief cannot be claimed in respect of what Revenue call unearned income (such as rental income). For married couples dealt with under joint assessment, the relief is looked at separately for each spouse so it is not transferable between spouses.
Must I fill out CGT section?
Q I sold an asset in 2016 but no profit was made. Do I fill out the Capital Gains Tax section on Form 11 or ignore?
You have to calculate the loss you have suffered and record this on your tax return. You state the sale proceeds on your tax Form 11 tax return and the type of asset sold. You also have to record the amount of your loss. This is broadly speaking the sale proceeds less the original cost of the asset.
If you file a Form 12 tax return each year, then you should declare the sale in the Capital Gains Tax section of the Form 12. If you are not required to file a Form 11 or Form 12, then you should report the sale to Revenue on a Form CG1.
It is important to make a tax return and claim the loss to ensure that if you sell an asset in a later year at a gain, you will have declared the loss on the asset sold in 2016 and this loss can then be used against the gain on the later sale.
There is a statutory four-year time limit for making tax claims and if you did not declare your loss and sold an asset at a gain after five years, you would not be entitled to claim the 2016 loss against the gain. For married couples taxed under joint assessment, one spouse's loss can be used against gains of the other spouse - that is, capital losses are transferable between spouses.
Is tax owed on sale profits?
Q My husband and I have just moved house - after selling our first home in September. Do we need to declare the sale of our first home in a tax return this year? Must we pay tax on any profits earned?
Clontarf, Dublin 3
Assuming you have always used the property as your principal private residence and the sale does not reflect development potential, then the profits are tax-free.
You should make a return of the sale using Form CG1 , Form 12 or Form 11 and claim the private residence relief from tax. It is usually in the year following a sale that any profits made from that sale are declared in a tax return. So the actual details of your September 2017 sale itself do not usually get reported until 2018 in a 2017 tax return - which is to be filed by October 2018 (or mid-November if filing online)
Sunday Indo Business