Jill Kerby

Hi everyone – I will be away the week after next, so please find two weeks worth of columns here – for November 18 and November 25.(The postbag was overflowing with letters – enough for the two weeks.) Hopefully you’ve a little extra space… cheers, Jill

 

 

 

THIS WEEK’S Q&A: SAVINGS, PENSIONS, PROPERTY & MORE

 

My postbag and inbox are overflowing with your letters and queries. email Savings, mortgages, pensions, stockbroker fees, inheritances – and dental expenses – are among the pressing topics from readers all over the country in my post (and internet) bag. Read on:

 

Mr L McK writes: I have just spent £3,000 sterling on dental treatment in Newry. Will I be able to claim the dental tax relief?

Yes you can.  A qualifying dental treatment attracts tax relief at your standard income tax rate of 20%.  It also applies to qualifying medical treatments, which is why many people who do not have health insurance but have savings, or who do not want to wait so long for treatment here decide to go abroad for less expensive treatment and then claim their 20% tax relief.  You just have to fill out a Med 1 or Dental form Med 2 and submit it to the Revenue. (See http://www.citizensinformation.ie/en/money_and_tax/tax/income_tax_credits_and_reliefs/taxation_and_medical_expenses.html    )

 

 

Ms MB writes:  Can money be withdrawn from a credit union like it can from a bank at short notice. Is the interest rate lower?  Does it remain secret or is it declared to the State like the banks do?

So long as your deposit is not secured against a loan, you can withdraw some or all of it without advance notice, though every credit unions sets its own credit and lending terms. Some allow just €1,500 withdrawals a day, others less or more, so check with your local union. You may only have to give a day's notice.

Interest is paid in the form of a savings dividend: many credit unions are paying no dividend or very tiny dividends (maybe 1%) mainly due to their level of bad debts and because, like the banks they are not lending as much as in the past. Again, ask about their dividend history.

From January 1, 2014 all credit union share dividend and deposit interest paid to members is subject to 41% DIRT with the exception of dividend or interest paid to members who are exempt from DIRT (certain people over aged 65 and certain people who are permanently incapacitated). Before 2014 certain types of credit union accounts were not subject to DIRT. DIRT exemptions can be arranged for you (if you qualify) by the CU on your behalf with the Revenue; all DIRT is paid automatically to the Revenue.

 

Mr JM writes: When the owner of an Approved Retirement Fund dies and the fund is passed to his dependents, are they taxed?

 

Approved Retirement Funds is a post-retirement investment vehicle for mature pension funds held mostly by self-employed people, proprietary directors and an increasing number of members of occupational defined. The ARF option means that you don’t have to buy a poor value annuity-based pension income but can draw down an income or capital from the ARF as you need it. (The government requires you draw down at least 5% of the fund each year – 4% from next year.)

There is no tax payable on a deceased person’s ARF if the ARF itself transfers to the spouse at death or he/she encashes it. This is because all transfers/inheritance between spouses is tax-free. Children under 21 who

inherit an ARF pay no income tax on it (that would otherwise apply in the year

the holder dies) but they will pay 33% inheritance tax. A child over 21 who

inherits an ARF pays income tax due but no inheritance tax.

 

Check out this link - http://www.davyselect.ie/customer-service/faq-arf.html

Scroll down to "What benefits are payable on Death".

 

 

 

Ms LM writes: I am married, 61 and hope to retire in May 2016 or July 2016 after 40 years service as a radiographer. My pension will be about €25,000 after all deductions- it won’t be enough to stretch to all our expenses.  Is it correct that Portual is a good place to retire to as it does not charge income tax on pensions?  My husband will retire officially next year and get his old age pension.

 

Two EU countries do not tax pension income  - Portugal and Malta – (Australia is another) because pension fund contributions are paid with after tax income and the pension income at retirement is tax-free.  Our system works in the reverse.

The only way retirees from Ireland can avail of claiming their pension funds tax-free is to be a tax-resident in these countries and to have moved their pension funds to them before they retire and claim their income (usually as PAYE earnings).  Malta has already been the destination for some companies and individuals who have moved their active pension funds in order that the tax-free status (and higher tax-free lump sums in Malta’s case) becoming available to retired members but there have been recent reports that the Revenue Commissioners are intervening, despite a previous success court case. Someone who becomes a tax resident in these countries can also then also be paid their old age state pension tax-free and not be charged tax by their new country’s tax authorities.

Anyone who wants, or thinks, they might be able to ‘genuinely’ retire to these pension tax exempt countries (‘genuine’ is the Revenue’s requirement) should get specialised, tax and financial advice. I have passed onto you the names of some companies that work with ex-pat retirees.

If you have a personal finance question for Jill, please email her at jill@jillkerby.ie or write to her c/o this paper.

Ends

 

 

 

November 25, 2014

Jill Kerby’s MoneyTimes

 

THIS WEEK: MORE OF YOUR PERSONAL FINANCE QUESTIONS

Mr GK writes: I am a retired postman. I drew down my first payment on an ARF and had to pay 4% PRSI. Do the PRSI contributions give me any entitlements?

 

Once you hit 65 your income will not be liable to PRSI deductions anymore. Meanwhile you are still entitled to its few remaining benefits - the state pension at 65 (if applicable), one free eye and dental check-up and basic treatment, etc. Check out www.welfare.ie for all the benefits you can still collect.

 

 

Ms TS writes: We bought a house in 1989 for £30,000 that was our main residence until 2006. We moved but kept this house and rented it out. When we moved out in 2006 we got a €300,000-€310,000 valuation. We have sold it for €263,000. Can we use the valuation we got in 2006 for the purpose of calculating the CGT liability?

The way to calculate your Capital Gains Tax is to take the sale price and subtract the original price you paid in 1989. That is the gain. But you only need to pay the proportionate tax to the number of years that the property was rented out, minus the final 12 months that the Revenue discount as it is assumed that the property is being repaired/renovated/shown to the buying public, etc over that year.

In your case the taxable value is €233,000, that is, €263,000 – €30,000 = €233,000.  You owned the property for 25 years but only seven years is liable to CGT on the sale proceeds, so if €233,000 accounts for 25 years profit, €65,240 is the seven years of profit liable to the CGT at 33%. (1/7th of €233,000) Your gross CGT bill should be in the region of about  €21,530 but you can both offset this bill with your annual CGT personal allowance of €1,270 and any selling costs.

 

 

Ms HW writes: I am looking for independent financial advice that I am willing to pay for. I once contacted an advisor in Dublin who didn't get back to me.  My overall feeling is that these people are only interested in the big investor and not the smaller investor like me.  

You are quite right that it isn’t always easy to find a good fee-based adviser. I only tend to deal with fee-based ones, but as you say, some have wealth asset limits and may not be affordable. Unfortunately, so long as commission remuneration is the norm here for the sale of most life assurance and bank investments – it has been finally banned in the UK - fee-based advice will mostly be sought by, and offered to people of greater means.  If you have money to invest, keep looking – ideally for an independent chartered certified financial planner or an experienced, licensed financial adviser who will charge you a reasonable fee for a wealth review and recommendations.

 

Make sure to ask upfront how much is their hourly rate or other fees (plus VAT) and then be sure to go very well prepared with all your accounts, documents, contracts, earnings, how much tax you pay, the value of your assets (house, pension funds, etc), savings, your debt and household running costs.  Set this all out in a very clear schedule; it will save them time and you money (in the form of their hourly fee.)

Ends

 

Mr ML writes:  I thought I heard somewhere that if a lending institution sells its mortgage book to one of those big overseas investors who are buying them up,  these debts become unsecured. Can you tell me am I right or was I dreaming.

Sorry to spoil your dream, but even after mortgages are bundled up, securitised and sold on, their repayment status does not change and the mortgage holder is obliged to keep paying the new owner.   Where you have a lump sum to clear the balance of your loan, you could approach the new owner (this has been tried with IBRC loans) and see if they will discount the balancing payment. There’s no harm in trying. 

 

Mr PR writes:  I am not a stock market investor but had a bit of money in Waterford Glass (I had a family connection there and believed in Tony O’Reilly) and as an ex-farmer I also own some Kerry Group shares. I want to offload a small bit of the Kerry shareholding – about €5K in all – and take a punt on Bank of Ireland and INM now.  I heard you on the radio mentioning a low cost stockbroker. Can you give me their name?

The execution-only stockbroker in question is Sommerville Advisory Markets (see www.sam.ie) where transaction costs are as little as 0.15% for trades worth up to €10,000.

Are you sure you want to trade in Kerry shares – which have proved so incredibly valuable to their holders for the last few decades – in order to take a gamble on two companies that destroyed so much wealth in recent years and neither of which show much sign of rewarding shareholders either with decent dividend payments or future dividend growth?   

It’s never a bad idea to get second or third opinions – especially about gambling on the stock market. I recommend you find a good, impartial financial adviser to discuss your plan – you wont find either at a bank or stockbroker company.

 

If you have a personal finance question for Jill, please email her at jill@jillkerby.ie or write to her c/o this paper.

 

 

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INSURE AND SECURE YOUR HOME AGAINST UNWELCOME VISITORS – AND COSTS - THIS CHRISTMAS SEASON

 

Long time readers of this column know how loathe I am to mention Christmas before December, but a survey produced by Aviva Home Insurance has raised an important issue – not just the huge cost of Christmas for the average Irish household this year - €1,463 - but the real and increased risk of break-ins and robberies during the Christmas season.

And I know all about that.

One lunchtime last December, while I was sitting at this very computer, writing a MoneyTimes column, a navy track-suited thief tried to break into my house via a second floor window at the end of in the corridor outside my office.  It was a sunny, crisp day and the smashing of a pane of glass brought myself and my 20 year old son dashing out of our rooms. 

The cowardly thief, who the Gardai figured was carrying a small hammer or heavy screwdriver, jumped off the adjacent shed roof and swiftly walked down the back garden and over the wall.

The Gardai told me this brazen burglar was “simply out doing his Christmas shopping” - my valuables - which he would then sell off (or give away) for cash which he would use to buy presents for his family and probably to feed a drug habit.

Fortunately, because we were home, he scurried off, but earlier that morning he had badly frightened an elderly neighbour who caught him looking into her kitchen window. Fortunately, she too always keeps her back door and downstairs windows locked.

I don’t keep my alarm system on during the daytime while we are in the house – who does?  But that incident last December has certainly made my family more security conscious, something Aviva says should be everyone’s priority this Christmas, when between €350 and €500 worth of gifts are under Christmas trees, which is why Aviva tops up their customers’ contents insurance cover by 10% for December (which of course will also the value of all other valuables that thieves target – cash and jewellery, mobile phones, computers and tablets, wide-screen televisions, etc.)

According to the insurer, nearly a third of respondents admit that a burglary is a big fear over the Christmas season and for good reason:  the number of burglaries rise by a whopping 25% around the Christmas/New Year season say the Gardai and the prosecution and recovery rate is a fraction of that.  

 

These are Aviva’s ten top tips for protecting your home this Christmas:

• Check your home insurance policy to make sure your Christmas gifts are covered in the unlucky event of a burglary. Aviva increases the contents sum by 10% - all the insurers should.
• Don’t leave Christmas gifts in plain sight of windows and potentially in view of burglars. Keep them hidden as long as possible;
• Lock away any garden tools or ladders so that a burglar cannot use them to break into your house and use a heavy-duty padlock to lock your garden shed;
• Develop a safety-check routine ensuring all windows and doors are locked before going out;
• Tell your Neighbourhood Watch or a trusted neighbour if you’ll be away over the period;
• Don’t leave car keys in plain sight on hall tables or wall hooks;

If you are leaving your home for an extended period over Christmas, ask that neighbour or friend to check the house, take in post etc;

• Even if your social media profiles are closed to ‘non-friends’ don’t use them to announce you will be away for the holidays. Burglars monitor these sites.
• When you go shopping/socialising over the holidays give the impression that someone is home - consider leaving on a radio, TV or some lights;
• If you are leaving for an extended period and taking your car, consider asking that friend or neighbour to park their car in your driveway from time to time to give the impression that your house is occupied.

 

Last December, when the break-in attempt was made on my house, the Gardai told me that while a good security system and even CCTV cameras are a good idea, a loud, barking dog is “one of the best deterrent of all” particularly since the vast majority of thieves are opportunists.

 

However, security companies insist that secure windows and doors with locks and other devices that prevent the thief from entering are what we should also be considering.

 

Finally, too many of us unwittingly allow strangers who might be burglars into our homes, the other and easiest way our homes get robbed.

 

This Christmas, be wary of door to door salesmen, charity collectors, choristers and any strange tradesmen who offer to clear your gutters or are “in the neighbourhood” checking for gas or electricity faults. Call a neighbour, the utility company or dial 999 if you feel threatened.

 

If you have a personal finance question for Jill, please email her at jill@jillkerby.ie or write to her c/o this paper.

 

 

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BETTER IN YOUR POCKET: HAVE YOU CLAIMED YOUR TAX BREAKS?

 

The annual pay and file tax deadline – November 13 via the Revenue on-line system, ROS.ie isn’t just for the self-employed who want to top up their pension funds in order to claim additional tax relief on last year’s tax bill.

It’s also a requirement for anyone who has non-PAYE income or for anyone who hasn’t claimed all their tax credits and allowances for up to the past four years.

These are the most common tax credits/reliefs for self-employed and PAYE earners:

PENSIONS

If you are self-employed, a sole trader or have a director’s pension, you have until Nov 13 to top up your contribution and file and pay your tax liability via the Revenue’s on-line service ROS.ie.

Pension rules dictate that you can contribute up to 15% of your income into a personal pension (including a PRSA) up to age 30, 20% up to age 39, 25% up to age 49, 30% up to age 54, 35% up to age 59 and 40% up to and over age 60.

On these contributions you can claim either 20% income tax relief if you earn up to €32,800 or 41% if you earn over that amount.  For every €100 you save, the actual cost becomes either €80 or €59. For example: someone who puts €5,000 into their pension (€417 a month) by mid-November can reduce their annual tax bill by either €1,000 or by €2,050.

RENTAL INCOME

If you are a landlord you also need to file and pay by the deadline, even if your main income is PAYE. You can claim up to 75% of the interest on borrowings, plus other expenses against your gross rental income liability such as local rates (but not the local property tax), building insurance, repairs and renewals, utilities (if you pay them), cleaning, maintenance, management fees, advertising, PRTB registration fees, mortgage protection insurance. Only 12.5% of the value of the fixtures and fittings can be claimed each year.

For example, someone with €15,000 of rental income and €10,770 of allowable expenses will have net income of €4,230. Less 12.5% of the fixtures and fittings capital allowances of €875 will leave them with €3,355 worth of taxable income or €1,744.60 of 41% income tax, 4% PRSI and 7% USC. (Retired people pay no USC and may have a lower USC liability depending on their age and total income.)

Budget 2015 allows landlords next year to claim the Home Renovation Incentive Scheme of 13.5% VAT relief on renovations worth at least €5,000 up to €30,000.

MEDICAL EXPENSES

A long list of medical and dental expenses can be claimed against income tax at the standard rate of 20%. My colleague, tax expert Sandra Gannon of TAB Taxation Services says: “About 50% of all the new clients we take on each year are failing to collect their back medical and dental expenses that are not covered by private health insurance. This can be worth a lot of money to families in particular.”

You don’t need to fill out a Form 11 tax return only at the this time of year to claim the 20% tax relief; you can fill out a Med 1 or Med 2 form using the Revenue.ie PAYE ‘anytime’ service.  All nursing home expenses are tax deductible at the 41% rate to whoever pays them and health services incurred outside the state also qualify for the 20% tax relief.

HOME CARER’S CREDIT

This is a tax credit of €810 available to a jointly assessed married/civil partnership couple where one partner claims for one or more dependent people, including a child, someone over 65 or someone who is permanently incapacitated. The recipient can get the credit in their own name if they earn less than €5,080 (and a reduced credit if they earn up to €6,700.)

PRIVATE COLLEGE FEES

The cost of private college fees or post-graduate fees (less the standard registration fee of €2,750 this year) can also be claimed as tax relief at the standard rate of tax up to a maximum course cost of €7,000

MORTGAGE INTEREST; TENANT RELIEF

Both these reliefs are being wound down: mortgage interest should be paid at source at a rate of 30% to qualifying buyers who bought between January 1 2004-December 31, 2008 for the years 2012-2017. Tenants who signed a lease before December 5, 2010 can still claim tax relief but the amount is being phased out and will be gone entirely by 2018. (For more info see http://www.citizensinformation.ie/en/housing/renting_a_home/tax_relief_for_tenants.html )

 

Finally, don’t forget that you can retrospectively claim all these tax reliefs going back four years.

Better in your pocket than the Revenue’s.

If you have a personal finance question for Jill, please email her at jill@jillkerby.ie or write to her c/o this paper.

 

 

 

 

 

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THE WATER CHARGE REPRIEVE GIVES THE HIGH STREET AN EARLY CHRISTMAS PRESENT

 

The high streets of Ireland are collectively breathing a sigh of relief:  no water charge bills before next April (assuming, of course that there isn’t another u-turn by the government before the charge is scrapped altogether.)

The next big anti-water march takes place on December 10th, but with the flat rate charge for the next four years slashed to €160 and €260 per single or multi-occupancy household and every household in the country to be paid the €100 water conservation grant, bringing the annual charge to 260 and €160 respectively and the quarterly bills, where applicable, to just €15 and €40, is it any wonder that retailers are more positive about their Christmas trade this year? 

The four year moratorium, before fully metered water bills come into force from January 2019 at €3.70 per thousand litres of water will be welcome by all financially stretched households. But unless serious water conservation is practiced between now and then, families with older children in particular could be in for a big shock in 2019. 

Irish Water claim that annual, average adult water usage in Ireland is 43,000 litres a year (about 118 litres a day) or 11,000 litres fewer than in the UK.  Irish children under 18, they say, use an average of 21,000 litres a year (58 litres a day) compared to about 38,000 litres in the UK. This 21,000 worth of water is a free allocation and will not be charged.

Based on this metered usage, a five person family of two adults and three children, one over 18 and two under 18, will be charged €477.30 for their annual usage of 171,000 litres after 2018. This figure takes into account the 41,000 free allocation for the children under 18. The €100 water conservation grant will reduce that bill to €377.30, net, not €160, the four year flat rate.

Here is the formula:  43k x 3 = 129k + 21k x 2 = 171k – 21k x 2 = 129k x €3.70 = €477.30 - €100 = €377.30 net.  

This is still €117.30 more than the flat-rate multi-household net charge of €160 that Minister Alan Kelly suggested could be even further reduced by households by careful water conservation during and after the flat rate period of 2015 – 2018.

However, if you suspect that your family of five’s water use is closer to the UK average of 238,000 litres a year (and not the 171,000 Irish Water says such a family uses on average), then your bill, post 2018 will be €625.20 net, not €377.30 and certainly not €160.

Here is the formula:  54k x 3 = 162k + 38k x 2 = 238k – 21k x 2 = 196k x €3.70 = €725.20 – €100 = €625.20.

Examples of the amount of water used per activity differ. Different charts show that a washing machine uses just 65 litres of water; others 100.  Dishwashers use a pretty standard 20 litres per cycle, while showers vary from 35 to 49 litres (depending on whether it’s a power shower or not). Toilets can vary from 6 to 9 litres a flush. Hand/face washing and teeth brushing first thing in the morning and before going to bed typically uses at least litre of water per event. Drinking and cooking uses at least another three litres per person a day.

Let’s assume a family of five – three adults and two children use the dishwasher every day and the 65 litre washing machine just three times a week.  They each flush the six litre capacity toilet four times a day; take a daily shower each that only uses 35 litres; use one litre twice a day with which to brush their teeth/wash hands/face. They each use three litres for daily drinking and cooking.

Just these seven, careful, modest water events (the washing machine water use is averaged over seven days) will account for 343 litres of their estimated daily, 468 water litres a day.  

If the family uses this much, they will have just 125 litres left over every day for all their other activities. Not included in my list include rinsing plates or food containers for recycling; wiping up kitchen spills or wiping kitchen surfaces; washing floors and windows; scrubbing down the bathrooms; washing the car and watering/washing the dog; washing bed linen; all gardening activities. Any use of toilets and taps by visiting children and adults is not included.

Political objections to additional water charges aside, the fact is that a flat rate charge - in any jurisdiction - does not incentivise water conservation the way metering does.   But four years is a long time and no one knows yet how the Irish Water debacle will end.  For the moment, budgets have been given a reprieve and the Water Grinch has been kept at bay this December.

Next week, my 10 top tips on really enjoying Christmas without breaking the bank…

 

If you have a personal finance question for Jill, please email her at jill@jillkerby.ie or write to her c/o this paper.

 

 

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