Colm’s columns

Colm Rapple
Irish Mail on Sunday  Dec 9th, 2007

Single taxpayers can expect to gain between €2.70 and €8.35 a week from the increase in tax credits and standard rate bands announced on Wednesday. The increase in personal and PAYE credits is worth €2.70 a week. The widening of the standard rate band is worth a further €5.65 for those earning more than €35,400. But those earning more than €50,700 will have €1.46 of the gains clawed back in extra PRSI contributions.

That in a nutshell is the impact of Brian Cowen’s budget and it overstates the real benefit because it doesn’t take account of the fact that workers will need a 5% increase in pay over the coming year simply to compensate for the rise in consumer prices during 2007.

Even with the budget “concessions” those who manage to get such a pay rise will end up paying a higher proportion of their income in tax. Their income tax burden will have marginally increased.

This year an estimated 19.8% of income earners paid tax at the top rate. That’s expected to rise to 21.6% next year while the proportion exempt from tax is to fall from 38.2% to 37.6%.

They are not major changes but they are in the wrong direction. It’s clear that the days of giving tax sweeteners to buy pay moderation are over. There’ll be no benchmarking bonanza for the public sector this time round either while there is already increasing pressure on public servants to deliver greater efficiency. Major efficiency reviews are already underway and all Government departments have been told to come up with specific proposals by March 1 next.

So the prospects of a new national agreement being concluded look decidedly dim.

However, enough comment on the budget for the present. Let’s move from the macro to the micro and examine the possibly of claiming a tax rebate.

The basic budget changes should come through automatically. They’ll take effect from January 1 or as soon thereafter as the new tax credit certificates are issued. But there are many reliefs and credits that have to be claimed. If you want to go back a few years this is a good a time to get your claim in.

The Revenue allow you to go back four years so claims for 2003 can still be made up until the end of the year. From January 1, you won’t be able to go back any further than 2004.

So what might you be missing out on?

Most people know that they can get tax relief on medical expenses but many people don’t bother claiming it. Full allowance is granted for most medical expenses paid by the taxpayer in respect of himself, his wife, or any other person for whom he claims tax allowances. That includes visits to the doctor, prescribed medicines and appliances, physiotherapy etc. Up to last year the first €125 was disallowed (€250 for a family).

A tax credit of up to €40 was available in 2003 for trade union subscriptions. It has since been increased and is to be given automatically in the future but it wasn’t so in 2003. If you didn’t claim it, you didn’t get it.

The relief in respect of local authority service charges has changed a few times in recent years. In 2003 it was possible to get the relief through the PAYE system if you were paying a fixed charge. But you had to register. There was an upper limit of €195 in respect of bin tags. It had to be claimed.

Other tax reliefs that you might have missed include interest on loans used to extend or structurally improve your home, and rent relief which in 2003 was capped at €1,270 for a single person under 55 and twice that for a widowed person or couple. Those over 55 got twice those reliefs.

You might also have missed out on the carers’ tax allowance that was introduced at the same time as the individualisation of tax bands. It is worth €770 in saved tax. In other words it’s a tax credit of €770. Many of those entitled to this relief have been given it automatically. But there are many more who will only get it if they claim it.

To be eligible you have to be married and caring for children, a relative over 65 or an incapacitated person. While it is aimed at stay-at-home spouses you can have an annual income of €5,097 and still get the full allowance. Over €5,097 and the allowance is reduced by 60c for every extra €1 of income. So someone on an income of €6,097 gets a tax credit of €170 i.e. €770 minus €600. If the income goes above €6,349 there is no allowance left.

The person being cared for need not live in the home so long as he or she lives close-by – two kilometres is used as a rule of thumb by the Revenue Commissioners to define “close-by”. So even if the children are grown up you may qualify if you have an elderly mother or father living within two kilometres. Even if she still believes that she is looking after you, you can claim to be caring for her so long as she is over 65.

Those are some of the reliefs that you may have missed out on in 2003 and you must claim them before the end of the year or lose them forever. You may, of course, have a claim for subsequent years as well but you have plenty of time to get that in although the sooner you make the claim, the sooner you’ll have the rebate in your back pocket.