Making Cents: Your financial questions answered

Question
What are the tax implications if I worked remotely in Ireland for a company based outside of Ireland?

Answer
Your place of residence is considered in this regard.
Your tax residency will depend on the number of days you spend in Ireland during the tax year. If you stay for 183 days or more in Ireland this automatically makes you a tax resident of Ireland.
And if you are resident and living in Ireland for tax purposes, you must pay tax in Ireland on all of your income whether that’s income earned at home or from abroad. And if it happens that your income is taxable in Ireland and in the country your new employer resides, if the country has a double taxation agreement with Ireland, you won’t end up paying tax in both countries on the same income. You will be either exempt from paying income from tax in one of the countries, or you will be allowed a credit in one country for the tax paid in the other country.

Question
Liam, after some advice from the administrator of our company's pension scheme I paid €15,000 into my pension fund but I’ve just discovered that this advice was wrong because for tax relief purposes I was only allowed €12,000. My question is, can the €3,000 be brought forward and used for next year’s contribution or is the tax relief lost?

Answer
Unfortunately the €3,000 cannot be brought forward to next year.
There just wouldn’t be any tax relief granted on the additional €3,000 this year but it’s still invested in your pension plan.
However, if you haven’t maximised your contributions for 2023 then the €3,000, or whatever amount you have available for the 2023 tax year could be applied for tax relief when doing your tax return this year for the 2023 tax year.

Question
Hi Liam, I have a very good death in service benefit with my current employer which is four times my gross salary. I’m single and my parents are retired, and I would like my brother to be the beneficiary for this in the event of my death. If he inherited this amount, he could only receive I think €40,000 of the amount paid with the balance being subject to tax at 33%. I’m wondering are death in service benefits taxable and if they are, I'd probably change the beneficiaries of my death in service benefit to my parents who I think would be under the tax threshold. They could then gift the money to my brother over time. Your thoughts would be appreciated.

Answer
Death in service payments and/or life assurance policies are taxable unless they are received by a spouse/civil partner. In all other cases they will be taxed according to the relationship from the person they received the monies from so you are absolutely correct in saying your brother would have an inheritance liability of 33% on any amount received from you which is over €40,000 (January 1, 2025). This amount would increase to €400,000 (again from January 1, 2025) if received by your parents so if you did change beneficiaries to your parents there would be no tax liability from them provided the amount is under the allowable threshold.
They could gift those monies to your brother where neither your parents nor your brother would have a tax liability on amounts up to €400,000.
This amount is a lifetime limit so if your parents chose to gift him more money or he was to inherit further monies from them in the future, any amount over €400,000 would be subject to capital acquisition tax which is currently charged at a rate of 33%.

Question
Liam, I will be applying for a mortgage in the new year, and someone told me that if a bank sees on your current account that you placed a bet, it will be a huge red flag for them, and they will decline an application. Is this true because I place a very odd bet from time to time and I’m worried it will impact me.

Answer
Some people think that if anything untoward appears in their bank statements like placing a bet with the likes of paddypower.com, it will have an impact on their mortgage application. And this isn’t quite the case, the odd flutter is fine and anything in moderation is.
It only becomes an issue when it becomes a habit and is appearing in your account every other day and its impacting on either what’s left in your account at the end of every month or your ability to save.
Having said that, the tolerance level for betting transactions will vary from lender to lender and it's difficult to know what each of their tolerance levels are i.e. they don’t say they’re fine with four or five each month. One lender may be more cautious when they see a gambling transaction than another but again lenders judge you on many other things than just the odd flutter but if you want to be 100% sure it won’t impact you, then keep your betting transactions on your accounts to the very minimum, something that isn’t showing a regular pattern of betting.

Question
Liam, I’m 54 and my husband is 60 and back in 1994 we took out a life assurance policy where we each had life cover for €100,000 and serious illness cover for €50,000. The monthly premium at the time we took it out was €140 but we’re after getting a letter from the insurance company saying if we want to keep the same level of cover the monthly premium will increase to €367. If we don’t pay it and keep the premiums to €140 our level of cover will reduce to €47,000. The increase is too expensive for us, have you any thoughts because we don’t want to have no cover either.

Answer
The issue with your current policy is that it is a whole of life policy and what happens with it is, it’s reviewed every five years so the future monthly cost is unknown, so there could be a large increase in the premium to maintain the same level of cover or a large drop in the level of cover if you wish to maintain the same premium, and you’re seeing this play out right now and this is only going to get worse as you get older.
The solution is to have a term assurance policy where you have a fixed time period for the policy i.e. 10 or 15 years and it comes to an end at the end of the term, but you have certainty over what the premium will be i.e. it’s never going to go up. The drawback if you call it one, is that it ends after the time period chosen and that’s it but I’m wondering why you would need or want to have a life policy for all of your life anyway – normally people will only have a policy in place like yours until they are 65 or 70 max and then have a much lower policy for say €5,000 or €10,000 that can be used for funeral expenses but the idea of having a policy in place for life is only really used by parents who want to pay an inheritance tax bill incurred by their children if their estate is a large one.
Anyway, the reason why the premium you’re being quoted is so high is down to the level of serious illness cover. It’s accounting for about 78% of the premium being quoted.
If I was to separate out the cost and type of cover from the cheapest provider was offering over a 10 year period, and we spoke with all of them, it would look like this:
-Life cover in the amount of €100,000 for each of you = €55.90 per month
-Serious Illness in the amount of €50,000 for each of you = €187.59 per month
If you wanted some level of both and you wanted to know the monthly premium is fixed and you wanted to keep the premium at €141 per month, these are the options and again both are over 10 years:
-Life cover of €75,000 each and serious illness cover of €25,000 each = €141.13pm
-Life cover of €25,000 each and serious illness cover of €32,000 each = €139.41pm
When you look at the two different levels of cover here which cost about the same, the question I guess you’ve got to ask is would I (a) prefer €50,000 more in life cover or (b) €7,000 more in serious illness?
Some people might want more serious illness cover and that’s fine but by increasing the level of serious cover by €7,000 you’re dropping the level of life cover by €50,000 which is a big drop.

Liam Croke is MD of Harmonics Financial Ltd, based in Plassey. He can be contacted at liam@harmonics.ie or www.harmonics.ie