Use it or lose it! Some key allowances/reliefs to consider
Use it or lose it is an expression or indeed an instruction you will often associate with the sporting world. In rugby you will hear referees calling on players to move the ball away from a static situation or possession will be taken away from them. You will also hear it said in regard to the retention of essential skills. Practice the use of your skills and you won't lose then. Don't use them and you will lose them.
Of course this adage also applies to your physical and mental wellbeing where exercising our body's and mind's is vitally important. Use it or lose it well describes how we should approach some key and often overlooked pieces of financial advice. Let's look at some examples.
Tax Exempt Pension Contributions
If a self-employed person doesn't make a contribution into a pension plan by the tax deadline the tax relief that year is lost. If a company owner doesn't pay money into their pension fund before the end of the company tax year the company loses the tax relief for that year. Use it or lose it!
Large amounts of estate tax can be saved by a little planning. Let's say your estate is worth €2 million and you have 2 children. Leave a million to each and there could be €200,000 of tax payable by each child. However, let's assume you have 5 grandchildren. Leave them €32,500 each. Tax saved on €162,500. Use it or lose it!
Annual Gift Exemption
As an extension to Estate Planning have a look at this! The annual small gift exemption provides the ability to pass on €3,000 tax free every calendar year. If it is not used by 31st December, they lose it for that year. You and your wife/husband can each give each child €3,000 before the year end. Do the same for grandchildren and your son and daughter in laws. That's a total of €54,000 each year totally free of tax. Use it or lose it!
These are a few simple examples of how making straightforward but decisive decisions in the area of tax planning can deliver substantial savings. Estate Planning, in particular, requires good advice and consultation.
We would be delighted to assist you in this area in anyway we can.