Basic look at Tax Allowances

Plenty of countries worldwide have increased taxes or reduced tax relief incentives to weather the economic storm. This does not mean that all tax relief is actually claimed back by citizens. It goes without saying that knowing which social benefits and tax reliefs you qualify for can put you in a more comfortable position financially.

PAYE or Pay as You Earn is a common form of tax payment for full time workers in the UK, Ireland and other nations worldwide. It takes the form of employers withholding or collecting tax on behalf of the government from employees as a conditional payment of income tax on the employee's salary.

PAYE workers need to ask themselves whether or not they have researched and pursued every possible claim for tax relief back from their country's revenue authority. Accurate tax submissions not only save time but allow for faster claims. This makes it worthwhile to submit your taxes early.

Tax allowances are often added by governments to encourage savings and investments. For example: allowances on items such as pension contributions, private health insurance premiums and mortgage interest can be claimed in some countries. Are you claiming for all of your allowance?

Some individuals, often part-time workers or self-employed individuals, opt to pay all taxes due directly to the revenue authority. The disadvantage of self assessed individuals is that this approach requires an indepth knowledge of the Tax System and it takes time to work out the details for submission. If you are paying your full years taxes in one go (as opposed to monthly) you would need to budget your
year's spending very carefully.

The good news is that tax savings can be achieved through good tax planning and implementation. You may decide to hire a professional to manage your taxes - particularly if you have multiple income sources or have a lot of scope for tax claims. Being sure your claim is done correctly the first time not only saves you the headache of resubmitting your details but also saves you time.

Questions a self assessed individual need to ask themselves:

• Are you availing of all allowable expenditures and capital allowances against your self-assessed income?
• Are your tax affairs up to date and compliant?
• Are you incurring interest penalties and surcharges?

Tax planning is a key tool in controlling your Personal Economy. You may wish to consult a professional to ensure that you are budgeting correctly and have a system in place that is as tax efficient as possible. Maximising on all your tax reliefs and opportunities available is good habit to form and reliable advice is the best way to kick-start this great new habit.

McNamara and Associates are Tax Consultants in Ireland who have particular experience in wealth protection and Wealth Growth.