Jill Kerby

THE SELF EMPLOYED GET AN EARLY CHRISTMAS PRESENT

Are you self-employed? Thinking about it? Your timing couldn’t be better now that some valuable social welfare benefits have been finally extended to the self-employed, including sickness and disability benefit.

There are about 326,000 self-employed income-tax paying workers in Ireland, according to the Revenue (450,000, say the Department of Social Protection), quite low numbers compared to many other EU countries.  Ireland also does poorly in the number of new companies created each year and one reason often cited is that the self-employed and new entrepreneurs have a relatively small social safety net compared to people in other EU and OECD countries.

Here, the self-employed/sole trader and small business owners pays the same 4% social insurance contribution as every other worker, yet have been unable to claim the same benefits, like basic dental or optical treatments, sickness, disability or Jobseeker’s Benefit if their work dried up. The reason for the anomaly was the absence of the employer’s 10.75% PRSI contribution.

The great crash of 2008 highlighted how tiny that net has been for the Class S, self-employed. Employees were not the only ones to lose their jobs; so did the contractors and freelances who depended on those same companies for their livelihoods. Everyone’s fees dropped after the crash; our spending on artisan goods and services fell sharply while everyone’s taxes went up.

By 2016 the government could finally afford to make some reforms.

On the tax front, it introduced a €550 earned income tax credit for the self-employed, farmers and company directors who had not been eligible for the PAYE credit worth €1,650 (€1,830 from 2018). In 2018 it will rise to €1,150.

Last Spring the Department of Social Protection announced it was extending treatment benefits like dental and optical examinations under the Treatment Benefit Scheme to the self-employed and last week it was announced, at a cost of about €23 million, that the Invalidity Pension will also be payable starting next month.

The pension is a modest €198.50, is taxable and will only be payable to people under the age of 66 who, due to sickness or disability cannot work anymore and who have the qualifying number of PRSI contributions:

-       48 PRSI paid or credited Class A,E,H,S in the last complete contribution year r the second last contribution year before the date of their claim.

(This benefit is payable even if you have income protection insurance – something every self-employed person or small business owner should have had to protect their your income in the event of illness or disability up to age 65. The cost of income protection insurance is tax deductible at your highest rate of tax.)

When the government first suggested that it would consider extending PRSI benefits to the self-employed many wondered whether PRSI contributions would have to go up. Or if the new system could be voluntary, with people who could afford private dental/eye treatment or income protection insurance being allowed to opt out.  Instead, they found the money to finance the benefits …for now.

People decide to become their own boss for lots of different reasons: you might be stepping into a family business. Or you’ve worked for someone else and spotted a great opportunity to do something similar in a different way. Others become self-employed by necessity after losing a job and the hours can be more flexible if you also have a young family to care for. Artisans and farmers’ work, is clearly more ‘unconventional’ and is produced at a different work pace than that of the office or factory worker.

As every self-employed person knows, corporate life has some big attractions – a regular paycheque, a pension (if you’re lucky) and hopefully an opportunity for job security that will get you closer to the top of the queue if you need to speak to a mortgage lender.

Self-employment is riskier, but it also means you get to be the dictator or your own success. There’s no one else to blame if things don’t quite go to plan. It rewards people who can cope with risk and uncertainty and it suits people with imagination, are innovative and flexible. (There’s no question having a fully employed spouse or partner in the early days of self-employment will help you sleep at night.)

The best advice I ever got when I became self-employed 30 years ago was to get a good accountant and to start a pension. I did both and am eternally grateful I took it. But my accountant also told me that I would have to build my own welfare safety net of life, income and health insurances and to ring-fence at least one-third of my gross turnover into my tax payable account. Only after the Revenue got its cut, could I then pay myself.

These extra PRSI benefits are especially welcome for the self-employed on tiny incomes. The government has actually done the right thing.

The 2018 TAB Guide to Money Pensions & Tax will be appearing in bookshops and on line soon. See www.tab.ie for ebook edition.

HEALTH INSURANCE COMPANIES WANT US FITTER AND HEALTHIER

Many commentators believe that spending more money on the public health service will improve services and patient outcomes. Yet billions more has yet more money has been added to the HSE budget for decades, too often with less than sterling effect.

Preventative medicine and early intervention should be getting a higher priority from the HSE especially as our population lives longer. Treating medical conditions associated with old age, not in general hospitals and public care homes, but in local community and in people’s own homes is an important part of the solution. The Department of Health does appear to be trying to introduce new community and home based services but rearguard battles continue against its own expensive bureaucracy and many vested interests.

Fortunately for those 2.1 million members of private health insurance plans, there has been access to preventative health benefits for many years – like benefit payments towards the cost of GP check-ups, early intervention consultations, annual or bi-annual health screenings, physio services and other checks and treatments.

Now, the insurers are coming out with on-line fitness, diet and lifestyle blogs and programmes that app-savvy customers (with high expectations) will easily integrate into everyday lives and schedules.

The latest one is called healthcoach from Laya Healthcare that was launched a week ago, and is a unique, free fitness, diet and wellness programme for every one of their 580,000 customers aged over 18.

First, the customer fills out a short on-line survey (and for the record, I am a long standing Laya customer) and then makes an appointment for a 30 minute face-to -face, health and fitness consultation with a qualified health coach at one of the six, designated healthcoach clinics around the country. (Currently there are three in Dublin and one in Cork, Limerick and Galway.)

I met my coach, a nice friendly guy called Gavin, at the healthcoach centre in the IFSC in Dublin, who took my blood pressure, glucose levels, body composition (which tells you all about how much fat, muscle, bone density, water retention) plus a lung function and three minute fitness test that gives you an idea about cardio performance.

He then asked some more questions about my lifestyle habits, exercise routine and diet and then started to select the elements that will make up my bespoke eight week programme.  The technology is impressive and within a few minutes it all appeared on my healthcoach smart-phone app.

The app, which is easier to use (and very logical) than I expected, includes a Fitbit step-counter, a large range of healthy eating recipes and calorie counters for every meal and snack you are encouraged to eat as well as a huge range of short ‘live’ videos on everything from how to give up smoking to, or in my case, even how do the two recommended yoga exercises I’m supposed to do three times a week. Dieticians on healthy eating choices and how check my calorie intake.

There are also videos pep talks from qualified psychologists on how to keep my motivation up (reading is my favourite activity of all time) and how to keep at the (tiny) fitness challenges I’ve set with my coach. I’m not a gym or sporty person, so mine are based around walking a lot more and extra cardio work I can do around the house, but keen hillwalkers and runners get help on how to complete the Ring of Kerry, Hadrian’s Wall, Inca Trail or Camino Challenges. 

Signing up for healthcoach ‘challenges’ also unlocks your ‘healthy’ reward offers and retail discounts from the likes of Lifestyle Sports, Eason and Deliveroo.

Recently Irish Life Health launched their new fitness and wellness benefit to their ‘Benefit’ plan holders - all three plans cost under €1,000 a year and are popular with younger customers. It offers refunds up to €250 refund a year when those plan members sign up for individual fitness programmes, or a combination of visits to life coach, nutritionist or dietician, for sports club membership or fitness wearable, massage treatments.

“Younger ILH members will appreciate getting some money back,” Dermot Goode, of TotalHealthCover.ie the independent health insurance adviser told me last week. “But the big attraction of Laya’s healthcoach is that it is an automatic, free benefit for every adult customer, no matter their policy, and it includes that one-to-one, face-to-face personal consultation.

“Laya has spent a vast amount of money and time on this new automatic benefit,” said Goode, “because they know that ultimately, healthier customers make fewer, less expensive claims.” 

Up to now, the health insurers have mostly been targeting their big corporate customers with their wellness programmes. They’re now focussing on individual customers.

So I’m going to give my eight week healthcoach programme my best shot. My fitness and weight loss goals are extremely modest and do-able.

Best of all, the price is just right.

The 2018 TAB Guide to Money Pensions & Tax will be appearing in bookshops and on line soon. See www.tab.ie for ebook edition.

HOW SMART WILL YOU BE WITH YOUR CHRISTMAS SHOPPING THIS YEAR?

I don’t usually mention the C word in this column before December 1.  Much as I love the anticipation of Christmas Day – decorating the tree and house, cooking special foods, carol services and buying gifts for loved ones, I loath how it all starts in October.  Before Halloween. Which now starts in September.

That said, there is no getting around the huge expense that we go to for the annual holiday.  When all the bills are added up for food, drink, presents, Christmas trees and decorations, new clothes, entertainment and travel, the typical Irish Christmas bill can easily reach €1,500.

Ideally, you will have budgeted this cost, saved into a special Christmas savings account or even spread out the spending by buying gifts on sale during the rest of the year, by stockpiling some alcohol, joining a Christmas Club at the butcher. The last thing you want to happen is to have a large credit card bill arrive in January that takes months to clear…just in time to lament that you haven’t any spare income or savings for a summer break with your children or other loved ones. 

Which is why it is worth revisiting the newest and most innovative current account and savings product on the market, An Post’s Smart Current Account now been rolled out to nearly every one of its 700 post offices nationwide.

First introduced last June, this unique current account and debit card rewards account holders for every purchase they make in store or on line at these popular retailers – Lidl, SSE Airtricity, Oxendales, Elverys, Sunway Travel, OutdoorLiving.ie, GreatBreaks.ie, Kennys.ie and An Post Insurance.

The Smart Account combines a MoneyBack feature, along with Smart Wallets where you can designate regular savings or your MoneyBack rewards; a Smart debit card in partnership with MasterCard®; access to online payments and a user-friendly Smart Account 24/7 app to keep track of your cash back balance and purchases.  

So how much could using this account be worth to you?  It entirely depends on how much you spend but, for example, Lidl and SSE Airtricity customers will receive 5% cash on all purchases over and 10% back respectively. This money money is then paid into their designated account once a month and then into a designated Smart Wallet, if they wish.

Since I spend about €100 a week at Lidl, and about €1,000 on electricity over the course of a year I would get about €360 back in cash just for paying ordinary grocery and electricity bills. Add a modest two week annual family holiday with a spend of say, €2,000 with Sunway (5% back) or GreatBreaks.ie (7.5%) and I’d see another €100-€150 being lodged to the Smart Account.

There are minimum purchases to watch out for and the cost of running this new current account is €5 a month; someone who gets free banking may want to take that into account. But the payback is automatically earning a 5%-10% cash reward. No one with a typical bank saving account these days needs reminding that €10,000 on deposit at 0.25% will yield them €25 a year.

Other popular supermarket cash back schemes are not as good value as they once were. There was a time when you could use your accumulated cash points at any time to reduce your grocery bill, say at Christmas when your weekly spending spikes. Today you get a cash coupon that you can only use over very short durations, which I seem to keep missing and sometimes only in particular stores.

By comparison, this Smart Account ticks all the right boxes a widely accepted debit card but no overdraft facility to risk overspending; a generous cash back scheme in which the reward can be automatically saved in a designated wallet.  And setting it up and using it is secure and easy.

Yes, post offices (and banks and credit unions) are closing down in many rural and urban areas.  But there’s no turning back to on-line banking services and this new current account doesn’t carry any extra charges, outside of the €5 monthly charge for direct debits and standing orders or ATM usage.

A couple more big-ticket retailers (like an airline or health insurance company) would be a really welcome addition to the list of Smart Account retailers, but even with just the nine, An Post reckons that a family that buys a typical spread of groceries, electricity, insurance, holidays, books, clothes and sports gear will earn about €660 in MoneyBack payments.

Getting started even now may only put a small dent in your Christmas shopping bill, but it could pay off a big chunk of next year’s…

The 2018 TAB Guide to Money Pensions & Tax will be appearing in bookshops and on line soon. See www.tab.ie for ebook edition.

DON’T WASTE THE EXTENDED TAX DEADLINE:  USE A TAX ADVISER

No one knows for sure what the total value of uncollected tax refunds is every year in this country, but it could be in the billions of euro.  Since 2008 this state collects a disproportionate amount of tax from individual income earnings, yet so may of us consistently fail to ensure that we pay only the correct amount of tax.

Fortunately, storms Ophelia and Brian came with a small silver lining:  the Revenue have slightly extended their final on-line file and pay tax deadline to Thursday, November 16 due to the disruption caused to so many individuals and small business. 

The paper filing deadline passed was October 31, but you can still register with ROS, the Revenue on-line service, to file and pay your 2016 Form-11 income tax liability and to claim refunds or, better still, make a pension contribution that will lower your bill.

The process is pretty simple once you register with ROS (which can take 1-2 days, so don’t leave it to the last moment) but on all matters tax, especially if you happen to be a novice filer, I highly recommend that you hire an accountant, or use the services of a popular and well-known tax refund firms, like www.taxback.com .

Missing your filing date, or not filing at all, can result in penalties and surcharges, which is another good reason to hire a tax expert who will not only ensure you don’t miss deadlines but can deal with any Revenue queries or represent you in the event of an audit.

So are you a “chargeable person”?  You are if you have non-PAYE income like rental income (including from AirBnB or holiday home), or you draw down dividend income from shares or you have any kind of part-time income, say, by selling stuff on-line, or from giving grinds, or from any kind of contract work.  Anyone receiving a foreign pension also needs to file, even if it is paid net of tax.

Landlords can claim certain property-related expenses and capital expenditure to reduce their income tax bill. The self-employed and sole traders have many business expenses they can claim, even if they work from home. Again, your accountant or tax adviser will have a comprehensive list of all these tax-deductible expenses, and of course, all your personal tax credits and allowances.

The other side of the file and pay process is that it is a chance to further reduce your tax bill, especially if you’re self-employed or if you are employed by a company but are not a member of an occupational pension scheme, by making a pension fund contribution. Depending on whether you pay income tax at the standard 20% or marginal 40% rate, you can claim tax relief up to the maximum allowable amount, based on your net relevant earnings (which are capped at €115,000) and your age.

For example, up to age 29 years you can contribute 15% of net relevant earnings; age 30-39, 20%; age 40-49, 25%; 50-54, 30%; 55-59, 35% and age 60 and over, 40%.  What this means is that for every €100 you contribute to your pension you can cut your tax bill by €20 or €40, depending on which rate of tax you pay.  The €100 will be invested in your fund but your cost will only be €80 or €60 to your when your income tax relief is claimed.

Pension (and income protection insurance) tax relief remains one of the few generous tax breaks left for all private and occupational pension fund holders because– like nursing home expenses – it can be claimed at the higher marginal rate as well as the standard rate of tax. Too many self-employed tax-payers leave this benefit behind (even people with access to occupational schemes in which employers can also make tax deductible contributions.) Meanwhile, only one in three people know to claim for qualifying tuition fees.

Some common standard rate tax breaks you should remember to claim if you are filing on-line by November 16, are for a long list of medical and dental expenses that include not just the usual GP and consultant’s fees (not already covered by medical insurance), but prescription drugs and medicine, prescribed medical, surgical, dental and nursing appliances, the cost of an ambulance, in vitro fertilisation, gluten free foods for coeliacs and dental treatments including crowns, veneers, orthodontic treatment (like braces for your kids.) 

You can also claim tax relief for payments for deeds of covenants, for taking part in the Home Renovation Scheme and if you qualify for the Help-to-Buy Incentive as a first time home buyer.

Best of all, while these tax breaks can reduce your tax liability, the most welcome news is that you may have up to four years of previously unclaimed expenses that you can claim. Use a tax expert to find them all.