As 450,000 overpay tax in 2021, it's time to claw some of it back

Many of are missing out each year on windfalls by failing to claim reliefs and refunds to which we are fully entitled

'It’s nonsensical how much money Ireland’s taxpayers leave behind every year'

In answer to a Dáil question last year, the minister for finance revealed that in 2019, 300,000 people overpaid tax to the tune of €170m.

Some 270,000 people overpaid a total of €150m in 2020 and no fewer than 450,000 overpaid a total of €300m in 2021.

Marian Ryan, consumer tax manager with Taxback.com, says that if you’re serious about good financial management, then claiming back tax reliefs and refunds should be one of the first steps you take.

“It’s nonsensical how much money Ireland’s taxpayers leave behind every year. The average refund our own customers receive is approximately €1,880 — that’s big money by most people’s standards.”

A recent survey from Taxback found that more than four in 10 people (43%) plan to save more this year, while proper household budgeting ranks as the second most popular financial goal, with over one in five (22%) pledging to do so this year.

Eight in 10 say they’re going to see if they are in line for a tax refund.

“We asked the very same questions this time last year and got the very same answers,” says Ms Ryan.

“People’s financial priorities have barely moved at all. In early 2022, the country was still reeling from the pandemic and indeed some Covid-19 restrictions were still in place. Today, the country is in the midst of the cost-of-living crisis and fears of a global recession are rife.

What this survey suggests is that Irish people appear to be more inclined to save their money than to get the tax refunds they’re due.

"While the rate of Irish household savings has fallen in recent months, the level of savings is still high compared to pre-pandemic rates, according to the latest figures from the CSO.”

In the third quarter of 2022, the rate of household saving fell to 19% of disposable income, down from the 20% in the second quarter of 2022 and the peak of 33.8% recorded at the height of the Covid-19 pandemic.

Prior to this, Irish households saved around 10% of their total disposable income, so 19% is still well above the long-term average.

“If Irish people claimed more of the tax refunds that were owed to them, they might be in a better position to spend more of their money while maintaining their savings too,” says Ms Ryan.

The CSO also revealed this week that inflation had fallen slightly in the 12 months to December — to 8.2%. This barely qualifies as good news however. It just means that prices are not going up as quickly as they were in the year to November.

So taxpayers will need all the help they can get this year, particularly when you factor in a number of policy measures that will hit the pocket in the months ahead.

Vat change

Ms Ryan points out that there will be an increase in the Vat charged on gas and electricity bills at the end of next month.

People should take time to work out what they are entitled to.

“This is because the reduced 9% Vat rate which currently applies to energy bills — as a way to help people manage the cost-of-living crisis — will be increased to 13.5%. Given the difficulties that so many people are still facing navigating the price squeeze, the government needs to give serious consideration to extending that reduced 9% Vat rate on energy bills.”

That reduced rate of Vat is also due to run out for the hospitality sector at the end of February, which means there will be an increase in the Vat charged, and therefore the price of hotel stays, hotel and restaurant meals, hairdressing, and trips to cinemas and theatres.

“The cost of filling up the tank will also go up from March 1st as the current excise duty reductions on petrol and diesel are due to come to an end on February 28. Drivers will be hit hard at the petrol pump as a result. The government still has time to extend these reductions. It should do so now in order to alleviate the concerns which many people may have about the price increases in the pipeline.”

So do yourself a favour and take a second look at the amount of tax you pay. There are a wide range of tax reliefs that you don’t get automatically, but must take action to claim, whether or not you’re a PAYE worker.

Nursing homes are of course very expensive, costing upwards of €1,000 per week. These fees are paid in a variety of ways, including through the Fair Deal scheme.

Operated by the HSE, the scheme aims to provide financial support to people who need long-term nursing home care. Under Fair Deal, you make a contribution towards the cost of the care and, if your assessed contribution is less than the amount of the fees, the HSE will pay the rest. While you can claim tax relief on the contribution you make, you can’t claim any relief on the contribution made by the HSE.

It can frequently happen of course that nursing home costs end up being borne by family members.

Everyone who contributes is entitled to claim, and the refunds due can be significant. Full payment of fees for a nursing home start at €50,000 a year at least, so even tax relief at the lower rate would entitle the payer to €10,000.

Third-level fees

We also know that those who pay third-level tuition fees are missing out on very significant refunds. Tax relief is granted at the standard rate of tax, currently 20%, and there is a limit of €7,000 per course on which you can claim relief.

There is also a ‘disregard amount’, which stands at €3,000 for a full time course and €1,500 for a part time course. This figure is deducted from your total qualifying fees — but it’s only taken away once per year, no matter how many students you’re claiming for.

You can choose to claim relief on your tuition fee installments either in the tax year that the academic year began or in the tax year in which you paid the installment. 

Note too that while you can claim relief on the student contribution, there are some third level fees — administration fees for example — for which you can’t claim.

If you’ve changed job during the year, or if your employment record is punctuated by periods of unemployment, there could well be tax reliefs due to you.

Similarly, if you or your spouse has been made redundant during the tax year, you might not be getting the full benefit of the transferability of allowances.

Take the time to sit down and review your affairs and make sure everything is in order and up to date.