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Self Employed/Self Assessment
Self assessment applies if you are self employed, a company director or a trustee or personal representative.
Failure to meet your tax obligations can result in significant interest and penalties. We are here to help you complete your tax return, calculate your tax liability and advise you on what payments are due. Self assessment does not generally apply people who pay tax through the PAYE system
What you are required to do
Under self-assessment you must file your tax return on or before 31 October in the year after the year to which the return relates.
You are required to:-
- file your return for the previous year
- make a self-assessment for that year
- pay the balance of tax for that year
- pay preliminary tax for the current year.
You must self-assess when filing your annual tax return. An exception is made where you file a paper return on or before 31 August in the year after the year to which the return relates.
>> MORE INFORMATION ON SELF ASSESSMENT FROM REVENUE:
Capital Acquisitions Tax (CAT)
CAT is a tax on gifts and inheritances. You may receive gifts and inheritances up to a set value over your lifetime before having to pay CAT.
Capital Acquisitions Tax is charged at 33% on gifts or inheritances made on or after 5 December 2012 (the rate was formerly 30%). This only applies to amounts over the group threshold. At HC our expert advice and experience in this area will ensure you avail of all reliefs and allowances available in order to limit your CAT liability. We will ensure you pay your CAT on time ensuring no penalties or interest charges are incurred.
Gifts become inheritances if the person dies within two years of giving the gift.
What do you pay CAT on?
Some items regarded as a gift or inheritance include:
- jewellery or a car
- house or lands
- stocks and shares
- the use of a property for free, or for less than it is
- an interest free loan
- a life interest or a right of residence in a property.
You may also have to pay discretionary trust tax on property held in discretionary trusts.
What do you Not pay CAT on?
You do not pay CAT on a gift or inheritance if either:
- it is given to you by your spouse or civil partner
- the total is below that group threshold amount (when its value is added to previous gifts and inheritances in the same group).
You do not pay CAT on a GIFT with a value of €3,000 or less from any one person in any one year.
Inheritance Tax Guide – Ireland
We at Cregan Kelly O’Brien Financial Planning are one of the leading advisors on planning for Inheritance tax or Capital Acquisition tax.
2 simple ways that you can offset or reduce this tax1/ Annual Gift Exemption of €3000
- You can gift €3000 per annum to anyone e.g. a child , grandchild or family member or in fact anyone, so 2 parents can gift a total of €6000 per annum to each child , so if you are a parent with two children you can gift €12,000 per annum in total and this payment is tax free for the recipient. This payment can be made every year and can help reduce the overall inheritance tax liability.
- Section 72 life assurance policyA section 72 life assurance is a life assurance policy specifically introduced to help people offset or reduce their potential inheritance tax liability
How a section 72 life policy worksSay you have estimated the total value of your estate including all your assets at €1,000,000. You have 2 children and you wish to leave your estate to them on your death. They can inherit €225,000 tax free each so that’s a total of €450,000 that they can inherit between them. They are taxed at 33% of the balance of €550,000 so their tax liability would be €181,500.
A section 72 life assurance policy will allow you to effect a life assurance policy for up to €181,500 and on death the proceeds of this policy can be used to clear the inheritance tax liability
If there are 2 spouses the policy is taken out on both lives and paid out on the death of the second spouse, it’s called a joint life second survivor policy.
How much will the policy cost ?
The cost of the policy will depend on the following
- Ages of the spouses
- The amount of cover required, this will need to be worked out based on the value of your estate and how many children you have and your overall plans for passing on your estate, eg have you made a will
- Health of the spouses and whether they are smokers or non smokers
The cost of taking out the policy is borne by the spouses and a section 72 life assurance policy is a very cost efficient and tax efficient of planning for inheritance
Why has inheritance tax become such a big issue for parents ?
There are 3 main reasons for this
- Inheritance tax thresholds have reduced to their lowest level and this has can created major issues for parents the thresholds are as follows
A) €225,000 to a son /daughter
B) €30,150 to a Parent /Brother/Sister /Nephew /Niece /Grandchild
C) €15,075 All other cases
- The tax liability has increased to 33%[ was 20%] on all inheritances over these threshold amounts
- Property values are on the rise again which has started to focus the mind for parents especially those who own a number of properties, this has had the effect of increasing the overall value of their estate and as a result the inheritance tax liability that will have to be paid by the children
You have 2 options open to you
- Do nothing and leave your estate to your next of kin and let them pay the tax liability when it becomes. Some assets may need to be sold in order to pay for this tax
- Take advice and start planning now to try and reduce and offset this tax
We at Cregan Kelly O’Brien financial planning will help you plan for the process involved
There are four stages in the process
- Have you make a will and if so what are the main details, if not how many children do you have and what are your plans for your estate
- What is the total value of your estate now , we can help you work this out
- Work out the potential tax liability based on your estate value and plans for inheritance
- Advice you as to the best options to reduce the potential liability
We at Cregan Kelly O’Brien financial planning are here to help and assist you in planning for your inheritance. There are simple ways to reduce and offset this tax and we will discuss these options in detail with you