Jill Kerby

POSTBAG PROMISES A HAPPY CHRISTMAS FOR SOME

A recent column warned readers who haven’t claimed tax refunds going back to 2012 that they have only until December 31 to do so.  Our last postbag of the year includes some questions about what exactly you can claim:

Mr JM writes:  I spotted your article about tax refunds. My wife stopped work at the end of 2013 when our second child was born. I work for the County Council but have not seen any deduction for the Home Carer’s grant on my payslip. I was told they do not have anything to do with it. Can I still apply for it on my wife’s behalf or does she have to claim it?

As the single earner in the family, the refund comes to you. If you wish to claim the €1,000 for this past year and €810 for 2015 and 2014 – a total of €2,620 -  either go directly to the Revenue website (www.revenue.ie) and register your details under ‘myAccount’ and then follow the instructions to claim the refund or go to a tax adviser such as the excellent www.taxback.com which just last week produced a nationwide survey that estimated that up to 65% of all single earning families that are entitled to this annual tax credit do not know about it, or don’t bother to collect it.  I hope this makes your Christmas and New Year much happier.

Mr DG writes:  I am receiving a redundancy payment from my employer but there is tax due on the amount. Can I offset tax by diverting the money into an AVC?

You can offset some of the tax on your redundancy payment in a roundabout way, says tax adviser Sandra Gannon of TAB Taxation Services. Before you leave your employment, you can take out or make a contribution to an AVC to boost your final pension fund value and enjoy the 40% income tax relief (this is assuming you are not already fully funded.) Keep in mind too that for the purpose of tax relief on pension contributions, net relevant earnings in any given year are €115,000.  Sandra suggests you speak to the company accounts manager or pension trustee before you do anything to ensure that you get the correct income tax deductions.

Mr MD writes:  My wife and I are thinking of retiring to Portugal, have not yet converted our pensions to ARFs or annuities and are looking at the 10 year NHR (Non Habitual Residence) system. I’ve done a tonne of research but still don’t know if the payments from an Irish Approved Retirement Fund will be paid tax-free in Portugal.

I asked Marc Westlake of Global Wealth Management in Dublin, (full disclosure – Marc is my financial adviser) about this issue and he explained that “This is a very good question and turns on the right of the Irish Revenue to recover the tax already relieved on the pension contributions vs the rights of the individual to retire where they please.” Much will depend on your permanent residency status and you need to get a definitive answer from Revenue before you base your retirement plans (like whether to opt for an ARF or annuity) on any assumptions about the tax status of your payments.  “This is absolutely not a DIY area in my experience,” he said.  A qualified, impartial review of your retirement plan from a fee-based financial planner is probably the best next step you can take.

Ms AM writes:  I have a house that I have rented since 2013 when I moved abroad, but I wasn’t aware until now that the tenant was supposed to deduct 20% and pay it to Revenue each month.  I am a registered landlord and have declared the income and paid all the tax due. I am worried sick now that the tenant should be paying this amount every month to the Revenue, even though I don’t think they should be responsible for doing so. 

My understanding is that this rule was introduced to ensure that at least the standard rate of income tax on rents was paid to the Revenue where a property is owned by a non-resident landlord who would be very difficult to chase for the money. The fact that you have diligently reported your income and paid any tax due each year means that there is no tax shortfall issue in your case. A tax adviser I spoke to – unofficially – said “Let sleeping dogs lie”.  He also said that you could register/contact the ‘myEnquiries’ helpline at www.revenue.ie to ask their opinion on your current arrangement.

Mrs HW writes: I have inherited a sum of money and would like someone to manage it for me as I have really no experience. I understand certain firms do this and that their charges can be high. Also that a good stockbroker can also advise costing possibly less. I feel very vulnerable and would like your advice.

I can understand your concerns, but ‘vulnerable’ women with money to invest are often the unwitting victims of unsuitable, commission-driven “advice” from banks, stock broking firms and investment salesmen.  You need to engage the services of a fee-based, impartial, independent financial adviser – certainly not a stockbroker - who will review your situation and make suitable suggestions for your circumstances. I suggest you check out the website of the Society of Financial Planners of Ireland (see www.sfpi.ie) and find such an adviser near you. Dublin based members usually service clients nationally.

DEADLINE LOOMS FOR FOUR YEARS OF VALUABLE TAX REFUNDS

Are you short a few bob this Christmas?  Are you dreading the credit card bill in January?  Having trouble paying the mortgage/car insurance/electricity bill? 

Then you may be in for an unexpected windfall – big or small – if you’re prepared to set aside a little time and make a little effort between now and 31 December…and claim a tax refund.

The Irish tax year runs from January 1st to December 31st.  Anyone who is self-employed or has non-PAYE income is familiar with their big tax deadline – October 31st – when they must file and pay their tax due for the previous year. (Non-PAYE income includes share dividends, rental income, a capital gain from selling an asset.)  

But the Revenue gives everyone one last chance for a refund, but that means getting the paperwork – on line is the fastest way – into them by 31 December, which happens to be a Saturday this year.

Last October  (and cynics would say this is uncharacteristic of the nation’s taxman) the Revenue actually wrote to more than 137,000 PAYE workers who have not applied for any tax refund in the last four years.  These people are on record for making some sort of claim some time before 2012, but the Revenue was suggesting that if they checked their pay slips and expenses receipts again, they may find that they have another refund coming for expenses they incurred since then.

And that’s the key message:  we all have a four year rear window of past expenses refunds that can be claimed from the Revenue.  They best known are for qualifying medical or dental expenses, for claiming some income tax relief on contributions to a pension plan, payments towards nursing home care for an elderly relative and for the hugely valuable Home Carer’s Credit of €1,000, which is payable to single earner couples with one or dependent people, including children under age18. (It was €810 up to 2015.)

So have you claimed for your family’s medical and dental expenses for the last four years, or for the special food or supplements they need or devices and even approved treatment done outside the state? (These must be expenses that have not already been paid by a private health insurance plan.)  Anyone who has had root canal or a crown might see a €200 refund; €5,000 worth of braces for a child could net a working parent €1,000.

But what about claiming that 13.5% VAT back on the cost of putting in new windows or extending the kitchen under the Home Renovation Scheme that was introduced a couple of years ago?  On a €20,000 renovation that’s a €2,700 VAT refund (albeit over a two year period). Did you need bridging finance to buy a home in the past four years?  The interest you were charged can also be claimed. Some homeowners can also claim mortgage interest tax relief. 

Meanwhile, if you’ve been in a private tenancy arrangement since 7 December 2010, this is your last chance you claim rent relief for the past four years. (It’s being withdrawn on a phased basis since 2011 and will be gone at the end of next year.)  From 2012-2016, a single person under age 55 could have claimed a total, maximum tax credit of €720; singles and couples/widows under age 55 could have claimed a total, maximum tax credit of €1,440; married couples/widows over aged 55, €2,880.

Another refundable expense that people forget about is tuition fees (as opposed to the €3,000 “registration charge”) for qualifying undergraduate and post-graduate courses.

For example, a student (who pays income tax), parent, grandparent, godparent or even a friend picking up all or some of the cost of full-time fees at an approved college would be entitled to a 20% income tax refund up to a maximum €7,000 per annum. Unfortunately, the government includes a ‘disregard’ amount, which was €2,250 in 2012 and went up by €250 increments each subsequent year. (It is now €3,000). Nevertheless, for someone paying the maximum €7,000 per annum, four years of full time course refunds would still be worth €3,500.

Tax refunds can be made for having a guide dog, for being a seaman, or for work clothing expenses if you’re a nurse. If your employer picks up the cost of your health insurance, you can claim the 20% relief on up to €1,000 worth of the cost of the plan. (Individuals with health insurance get the tax relief at source.)

Nearly all tax refunds are paid at the standard 20% tax rate, though some – pensions, nursing home expenses – are paid at the marginal 40% rate.

So don’t delay. Check out the myAccount site on the Revenue’s website (www.revenue.ie). Make it a very Happy New Year.

Do you have a question for Jill?  Please email her directly at jill@jillkerby.ie.

MISSING RENEWAL DEADLINE MEANS AUTOMATICALLY HIGHER NEW YEAR PREMIUMS

Nearly half the customers (45%) with a private health insurance policy will have a renewal date in January 2017 claims the Central Bank, which regulates the industry.  After your Christmas credit card statement, it will probably be the least welcome bill you will pay as the New Year dawns.

But as patients waiting for a public hospital operation or to see a specialist can attest -  that number has reached the 550,000+ mark – an insurance plan is the difference between endless frustration and diminishing health, and timely, efficient treatment in a comfortable, calm, clean facility.

The Central Bank study focusses on renewals, with 85% of consumers “renewing the same policy with the same provider”. Auto-renewal by-passes consumers making contact with their insurance provider “to ensure that they are being offered the most suitable cover available to meet their individual needs and circumstances.”

Happy days then for VHI, Laya Healthcare and Irish Life Health (which was created out of the merger of iAviva and GloHealth.)  With such a tiny market, the Central Bank’s warning to shop around is all the more important if you want to avoid overpaying next year.

But this isn’t exactly news.  Specialist health insurance advisers like Dermot Goode of TotalHealthCover.ie, a regular contributor on national and regional radio stations has been urging everyone with health insurance for years (that’s over two million of us) to never just grin and bear an annual price hike or allow your plan to automatically roll over.

 “Anyone who still has the same policy for even two years is paying too much,” is Goode’s familiar mantra. Anyone who is still paying for the old VHI Plan B (and higher) or Laya’s HealthManager variation plans from several years ago is unnecessarily paying astronomical premiums. 

These are the consumers Goode suggests who are often older and clearly wealthier (but not necessarily smarter) than a typical younger person or young parents on a restricted budge. They clearly haven’t checked out the market and especially the corporate versions of their own plans which are often re-designed for large companies. Under our Lifetime Community Rating pricing system, every plan on the market   must be available to everyone and not just to a business client and their employees.

Anyone still on the old comprehensive Laya HealthManager plan, which my husband and I had when it first came out and kept for many years until the price went through the roof, is now paying a whopping €355 a month or €4,262 a year!  I frequently meet such people during my personal finance seminars.

I’m still with Laya (which grew out of the original Bupa Ireland that broke the VHI’s monopoly in 1996.)  But my current policy, Simply Connect Plus, which also offers great private hospital cover and day to day expenses, only costs us €1,160 each though it’s price (without the usual affiliation group discount) now costs €1,246. I know my premium will be at least that next July, so I will shop around again using Dermot Goode’s website tools.

Health Manager is a great plan, but not great enough to justify paying €8,527 a year for the two of us.  The biggest difference between the two – as far as I am concerned – is that I must not pay a modest, but only once in a year excess for an in-patient event.  Our bill until next July if we stick with Simply Connect Plus will be least €2,500.  Expensive? Sure. Extravagant?  No.

Dermot Goode insists that there is still some pretty good value in the health insurance market if you are willing to take the time to the kind of cover you want and how much you can afford to pay. You can use the comparison tools on the HIA.ie or providers’ websites, but there are hundreds of plans to confuse you. Use a good broker (of which there are many specialising in healthcare.)

Finally, here’s two vital tips: Do your children need to be on your plan. No. You can buy suitable ones for them (kids go free deals are back, so check them out) that will be much cheaper than an adult one.  A big attraction of the new Irish Life Health plans is the free on-line GP consultations; families on tight budgets and working parents are already finding this benefit a godsend. 

Are the very cheap, lowest level, public hospital access only plans worth having? You won’t get a private bed, they usually don’t cover specialists or provide other out-patient benefits.  At the very least you want a plan that lets you jump long consultants queues and private hospital treatment (including daytime A&E emergencies).

Yes, the run up to Christmas and New Year’s Eve are busy times but give yourself a head start on 2017 by adding one more shopping trip – for as low a health insurance bill as possible.

Do you have a question for Jill?  Please email her directly at jill@jillkerby.ie.

Ah, Christmas…you’re back and just as pricey as ever? Read on

The Wednesday was bright and cold when my friend Susan and I arrived in Newry at 11am to do some Christmas shopping. 

Since neither of us had been there before (and I have no sense of direction) we took the wrong motorway exit and ended up snaking through Newry’s one way traffic system behind a great many other Irish-reg cars. I eventually pulled into the bus station where two other middle-aged women were standing on the footpath, one of whom was staring into her mobile phone.

I wound down my window.

“Excuse me, sorry to bother you. But can you direct me to the Buttercrane Centre?”   “Ha. That’s what we’re looking for,” the one on the phone replied in a Dublin accent. “We’re lost too.”

It was that sort of day. We did find the centres – about half a mile away, bookending the canal that runs through the town. Both malls were full of Irish shoppers, filling up trolleys with clothes, toys and lots of booze. I’ve never seen such happy, welcoming merchants.

This was my first act of treason against the Irish consumer state. (Ordinary holidays abroad are acceptable given the quid pro quo with our visitors.)  As it turned out I only spent a few hundred pounds/euro and made up for it a little by going to the Irish Craft Fair at the RDS on 1 December (as I have done for over 30 years) where I ticked off my last present.

Fin. Finito. I’m done Christmas shopping and in record time. But between the differential on the price of alcohol between North and South (due to much higher excise tax here), the sterling/euro differential and the fact that so many of the Newry shops were also offering a €1 to £1 price peg, I figure I saved about €100 or 25% of my shopping outlay that Wednesday.

My biggest purchase?  A £150 faux leopardskin coat in Miss Selfridge for my drop dead gorgeous Brazilian godchild (who can carry such a look). It was already reduced by 50% and then knocked down – as a pre-Black Friday special - by another 25%.

I’m not sure I’ll do this again next year – I enjoyed the day out with my girlfriend more than the shopping - but savings like these are especially hugely welcome to  people with young families and far more limited budgets than mine.

If you can’t go North, and you really do enjoy the giving side of Christmas, you still need a shopping strategy that avoids leaving you with a smoking credit card and repayment migraine in the New Year.

So, once again, here is my Christmas spending survival guide.  It has faithfully served me – and I hope my readers – for many years:

-       Make lists : Gift recipients; Christmas tree/ornaments; food and drink; entertainment (movies, panto, zoo); Christmas clothes; holiday travel (petrol/train fares). Bring the list with you.

-       Set a spending budget. Use either cash, a debit card or a credit card when shopping, not all three.

-       Kris Kringle:  Ideal for large extended families. Set a price limit and/or do a themed Kris Kringle:  home made food items, chocolates, services.

-       Choose a gift theme for adult recipients. You can control your spending by opting for...books, DVDs and CDs, plants, food, alcohol. (See Christmas Gift Tips)

-       Compare prices. Use the internet, especially for toys, electronics. You can save time and money, but watch out for shipping charges and deadlines. If you can, shop in Irish owned shops.

-       Pace yourself. Leaving too much to the days before Christmas will result in impulse buying. Never overdress (you’ll get hot and bothered); don’t bring children or a reluctant spouse with you unless they are reliable load bearers. Don’t shop on an empty stomach.

-       Be security conscious. Wear a zipped handbag across your torso when shopping; don’t let anyone see you key in your credit/debit card passwords. Watch your shopping bags. Pickpockets love Christmas.

-       Beat the crowds and shop early. Get out when the crowds are thickest.  

-       Set a shopping time limit, say, a maximum four hours. Stop for a break midway. Check your lists. Once you get tired you’re at risk of overspending.

-       Recycle. This doesn’t just mean giving away gifts you received that you didn’t like. It also means recycling your precious and loved things that the person on your gift list may have admired. This is ideal for people with grandchildren, godchildren, nieces and nephews for whom they can start ‘bottom drawers’, for example.

I still have Christmas cards (and e-cards) to send out; packages to post to Canada and Australia; the tree to go up; lots of baking to do and a day’s worth of wrapping. The (frozen) goose awaits its oven…

And these are the best-spent hours of all…Happy Christmas.