• October 14, 2018
  • Bob Quinn
  • General

The ads are on the radio. The October pay-and-file deadline is looming.

Self-employed or otherwise, those Revenue ads should jolt you into action. The 31st October (or 14th November for online returns) is an important date for anyone with an outstanding tax liability for 2017.

In the first instance, we are looking at the impact of contributing to a pension. I will also outline two other schemes that could also significantly reduce you tax liability.

1) Contributing to a pension is one of the most tax-efficient things you can do this year.

Any surplus income should be set aside in a pension. Why? It’s the most effective way to ring-fence assets which are potentially accessible from age 50.

The main benefits are as follows:

  • Tax relief on your contributions
  • Tax-free growth while invested
  • Tax-free lump sum on retirement

Tax relief is at your marginal rate of income tax. Anyone paying 40% income tax will receive a tax refund of €4,000 for every €10,000 invested in a pension.

That €10,000 while invested in the pension grows tax-free. Unlike a savings account subjected to DIRT, a rental property subject to USC on gross rents and income tax, or an Irish Life investment portfolio subject to exit tax. The compounding effect on tax-free growth has a significant impact long term.

Depending on the size of your pension, the first €200,000 is tax-free. Regardless of the finer details of contributing to a pension, if you are looking for peace of mind and security about your long term financial situation, this is the place to start.

2) Invest through EIIS

An Employment and Investment Incentive Scheme (EIIS) is a worthwhile option for anyone with a substantial income tax liability. This scheme is especially useful where your income is not earned from a salaried job as it is not limited to PAYE income – so rental income and income from an ARF distribution may be invested via an EIIS, for example.

The scheme, which was conceived to facilitate the growth and expansion of high-potential businesses, allows qualified investors to invest in certain SMEs.

Need to know:

  • Investment term: 4 years.
  • Tax relief: up to 40% of the investment. The relief is given in two tranches: three quarters in year one and one quarter in year four (ts and cs apply).
  • The maximum investment eligible for tax relief is €150k per annum per individual (€300k per couple if they both have income in their own right).
  • When can I invest? EIIS schemes are usually open in the last quarter of the year.


Of course, every investment is a risk and an investment in a single firm is a greater risk, so you should not go into this scheme blindly (you can read my opinion on single security asset investments here). You may invest in more than one company (provided your total investment is less than €150k). It is also possible to invest in EIIS funds (where a number of suitable businesses are bundled) to spread the risk.

Independent advice is very important before you sign the dotted line in this instance. So Start Here.

3) Succession planning with a Section 73 Savings Plan (catchy, eh?)

The third scheme is a longer-term measure but is well worth putting in place for the eventual CAT (Capital Acquisitions Tax) savings it results in. CAT is the tax due on a gift or inheritance above a certain threshold. It can be substantial, particularly where the recipient is not a close relative of the disponer.

Opening a Section 73 savings plan is like an insurance policy for a future CAT bill.

Ideally, by the end of the eight years, the fund will be have grown to equal the CAT bill. Contributions can be made regularly or annually and the plan must be maintained for a minimum of eight years.

Continue your financial journey with The Money Advisers. Start Here.