Services to Irish-based Companies

Tax Tips October 2018

Tax relief for pension contributions

Contributions to an exempt approved scheme are allowable as an expense in assessing an employee’s liability to tax under Schedule E. This is only an income tax relief and does not apply to the Universal Social Charge (USC) and Pay Related Social Insurance (PRSI). The following are the applicable pension plans:

  • Occupational pension plans
  • Personal Retirement Savings Accounts (PRSAs)
  • Retirement Annuity Contracts (RACs)
  • certain overseas plans

Tax relief for employee pension contributions is subject to two main limits under Section 790A TCA 1997:

  1. Age-related earnings percentage limit

You can get tax relief on your pension contributions up to the relevant age-related percentage limit of your earnings in any year. This relief is only from the employment in respect of which the contributions are made.

The age-related earnings percentage limits are:

Age Percentage Limit %
Under 30 15%
30 – 39 20%
40 – 49 25%
50-54 30%
55-59 35%
60 or over 40%

  1. Total earnings limit

The maximum amount of earnings taken into account for calculating tax relief is €115,000 per year.

Contributions to more than one pension product

Where an individual has two sources of income (e.g. earnings from employment and profits from self-employment and is making pension contributions to an occupational pension scheme and to a personal pension plan, a single aggregate earnings limit of €115,000 applies in determining the amount of tax relievable contributions.