How to Manage Your Tax Requirements if You are Investing Your Income Online in Ireland
Investing is an activity that is no longer exclusive to brokers in suits in corporate buildings.
Today, anyone with a smartphone has the power to invest their money however they wish.
In fact, apps like eToro and Robinhood have been developed specifically to help novice investors to take their first steps into the world of stocks and shares.
However, it is important to be aware that, if you make a profit through investments, it is likely that you will have to file a tax return with Revenue. You may also have to pay a tax bill.
With that in mind, we’ve put together this handy guide on everything you need to know about tax if you are making money through investments.
Investment income and tax
If you are earning income through investments, you are obligated to pay tax on your earnings.
Investment apps like eToro will not act as a tax collector, so it will be up to you to self-assess your own tax liability.
Capital Gains Tax (CGT)
A CGT liability occurs where a profit is generated from the disposal (sale) of stocks, shares, property, and other types of investments.
The good news is that the first €1,270 of your cumulative annual gains from investments are exempt from tax.
However, any profit you make above this figure will be taxed at 33%, and it doesn’t matter how much you earn (or if you make a loss), you will need to file a tax return each year.
In other words, if you buy stock for €2,000 and sell for €5,000, you will have made a €3,000 profit. Once €1,270 is subtracted, €1,730 remains as taxable profit, and a tax bill (at 33%) of €570.90 is due.
Of course, if your investment has made a loss, you will not have to pay any tax as you have not made a profit.
It is important to remember that you are able to use your losses to reduce your future CGT tax liabilities.
Income tax, PRSI, and USC
Usually, you will only have to apply CGT to your investment income. Although, you will be subject to Income Tax if you also earn a dividend. This income will be categorized and taxed under normal Income Tax rules. The rates for Income Tax are 20% and 40%.
You will also get charged Universal Social Charge (USC) for your investment. USC tax is based on an individual’s total income. Standard rates for USC for 2021 are 0.5% on up to €12,012; 2% from €12,012.01 to €20,687; 4.5% from €20,687 to €70,044, and 8% above €70,044.
PRSI due, also known as “reckonable income”, includes professional, trading, and investment income. PRSI rate is currently 4%.
Who can help me file my investment tax return?
For many part-time investors, the prospect of filing an end-of-year tax return sounds like a real pain. This is where Taxback.com can help you.
Our team will manage all of the tricky tax paperwork for you — reducing your tax bill in the process. We will ensure you claim every tax relief and expense you are entitled to, so you don’t have to pay the taxman any more than you owe.
To get started, all you have to do is complete the short form here and our team will take care of the rest!
Why file with Taxback.com?
· Simple online process — no complicated forms
· We will ensure you claim every tax relief you’re due — minimizing your tax bill
· Every tax return filed is checked by a senior Irish tax accountant — 100% compliance with Revenue guaranteed
· 24/7 Live Chat tax support
