An estimated half a million people in Ireland paid too much tax last year, according to Revenue figures. The tax authority is sitting on €313m in overpaid tax receipts, at an average of €650 owed to every eligible person.
Why so much? One key reason appears to be low takeup of tax credits. Finance Minister Michael McGrath referenced one example in his recent Budget speech, highlighting the fact that fewer than 50,000 renters had so far claimed the rent tax credit as he raised its value to €750.
The rent tax credit reduces the amount of Income Tax renters pay on a calculation based on the amount they pay in rent versus their earnings. The credit is claimed when you fill in your Income Tax return.
And therein lies the issue. For many people, claiming a tax credit just adds another layer of complication on top of the already convoluted process of dealing with taxes. If you don’t fully understand the application process for a credit, or if you are unsure if you are eligible or not, you’re unlikely to put in for it.
That’s closely aligned to another issue – visibility. One survey found half of Irish tax payers believe awareness of tax credits and refunds is low.
And the rent tax credit is far from the only option that is experiencing low take up. Others include personal tax credit, employee tax credit, employed income tax credit, plus further options for people in specific circumstances such as carers, single parent households and families with incapacitated children.
Indeed, critics argue that another contributory factor in low take up is that the tax credit system itself is too complex.
Claiming a tax rebate
The first step to claiming back any overpaid tax is knowing you have overpaid in the first place. Given that lack of awareness is a primary reason for low tax credit uptake, it follows that a lot of people won’t even know there is money they could be claiming back.
This is where it pays to speak to a tax adviser. Based on your income, your personal circumstances and the tax you have paid in previous years, a tax specialist will quickly be able to explain which credits you are eligible for, and whether you have overpaid tax by not claiming them. You are able to claim for tax credits you haven’t taken up going back four years.
To make a claim, you need to submit an Income Tax return. You can do this online via Revenue’s myAccount portal. Go to ‘Review Your Tax’. Under the ‘Statement of Liability’ section, you will see the option to ‘Complete Income Tax Return’.
The return form includes sections for claiming eligibility for tax credits. Some, like the PAYE credit, are applied automatically by Revenue and you will already have received these if eligible. But others you have to claim for, which is why you should speak to an advisor if unsure. They will also be able to help you with the information you need to provide.