How to reduce your tax bill
1. Pay your tax bill on time !
It’s an obvious one to start with but not paying your tax bill on time will result in penalties and surcharges from the Revenue Commissioners.
Remember you have until 31st October 2008 to pay your IT (income tax) liability for 2007. You must also pay your preliminary tax for 2008 by the same date.
To help with cashflow consider direct debits. Revenue allow IT, VAT, PRSI and capital gains to be paid by direct debit to make tax more manageable.
2. Get a pension and make the most of it.
Depending on your age and profession, you can invest up to 40% of your net relevant earnings into a personal pension and avoid tax at the top rate. Also upon retiring 25% of your pension fund can be taken as a tax-free lump sum.
3. Claim for household expenses
If you work from home for your business either partly or fully, remember some of the house hold bills can be written of as a business expense.
This could include light and heat, insurance, telephone bills, broadband etc. One must be reasonable in the percentage used and don’t forget to keep all receipts.
4. Church and other charitable donations.
If you donate money to your church on a weekly basis remember you can claim this cost as a taxable expense.
The minimum donation must be €250 over 12 months and relief can be got from other charities which are revenue approved.
5. Invest in a business expansion scheme (BES).
Last year Brendan Cowan as minister for finance increased the limit one individual can invest in a BES in a year to €150,000. This investment can be set off against your income in that year. After 5 years any repayment of your BES investment is free of income tax.
You will however be liable for capital gains tax of 20% on any gains made less expenses.
Remember though gains are not guaranteed so seek advice when choosing the right BES for you.
6. Seed capital Relief Scheme
This scheme which runs to 2013 is designed to encourage those set up in business after they cease employment. Relief is given as a refund of PAYE for the 6 years previous to ceasing employment and the maximum relief is €91,440. The new business must meet certain criteria as set out by Revenue.
7. Credit check lists
Always check you are availing of the standard tax credits that are out there for the self employed.
http://www.revenue.ie/index.htm?/leaflets/it1.htm
8. Keep it in the Family.
And finally if you haven’t seen my previous article on tax tips – keep it in the family try and get a hold of this to see ten other tax saving opportunities for you.