Preliminary Tax

What is Preliminary Tax?
Preliminary Tax is your estimate of the income tax payable for the year and must be paid by 31 October.  It includes PRSI, Health Contributions and Income Levies as well as Income Tax.  The amount of Preliminary Tax you must pay to avoid a charge to interest in the lower of; 

  • 90% of your final liability to tax for the current tax year, or 
  • 100% of your liability to tax for the immediately previous year, or 
  • 105% of your final liability to tax for the year preceding the immediately previous year.  This option is only available where you authorise the Collector-General to collect tax by Direct Debit.  The 105% rule does not apply where the tax payable for the pre-preceding year is Nil.


The minimum Preliminary Tax payable is summarised in the following table: 

Tax Year

2010

2011

2012

100% rule

100% of 2009 liability & Income Levy

100% of 2010 liability & Income Levy

100% of 2011

liability

Direct Debit

105% of 2008 liability & Income Levy

105% of 2009 liability & Income Levy

105% of 2010

liability & Income Levy



Will I be notified of my obligation to pay Preliminary Tax? 

YES.  If you are on Revenue’s records as a self-employed person you will receive a Pay and File Reminder letter.

These letters are generally issued around the end of September each year.  However, it is your responsibility to pay sufficient Preliminary Tax even if you do not receive such a letter.

Top-Up Payments

A measure of relief is available where; 
  • You have filed your return by 31 October
  • The return contains all material facts necessary to make a correct assessment
  • You have not received an assessment by 31 October
  • You have paid an amount of tax on or before the specified return dates (31 October), which is inadequate.

Where the tax paid on or before 31 October is less than the liability for the tax year in question by not more than 5% subject to a maximum of €3,175, the additional tax for that year will be due and payable on or before the following 31 December.  Where the tax paid is less than the liability by not more than €635, the 5% test will not apply and the additional tax will be due and payable on or before 31 December.

When must I make my Tax Return?

You should send in your tax return as soon as possible after the end of the tax year i.e. you should send in your tax return for 2010 as soon as possible after 1 January 2011.  If you do not intend to file you tax return electronically through ROS and you want Revenue to calculate your Income Tax liability for you, to assist you in paying the correct amount by 31 October, you should file you tax return as early as possible, at least two months in advance of the due date or earlier.

What happens after I’ve made my Tax Return? 

Failure to submit your tax return by 31 October after the end of the tax year will result in a surcharge being added to your final tax bill for the year.  The surcharge is; 
  • 5% of the tax up to a maximum of €12,965 where the return is made within two months of the return filing date
  • 10% of the tax up to a maximum of €63,485 where the return is made more than two months after the return filing date.

Where a new business is set up the surcharge will not be imposed if the return for the first tax year is made by the return filing date for the following tax year.

When do I pay my Capital Gains Tax liability?

The tax year is divided into two periods for Capital Gains Tax payments purposes; 
  • “initial period” – 1 January to 30 November
  • “later period” – 1 December to 31 December

The tax arising in respect of gains in the “initial period” must be paid on or before 15 December in that year and the tax due on gains in the “later period” is payable on or before 31 January following the end of the year of assessment.

Where can I get more information on completing Tax Returns and Pay and File?
A year specific “Guide to Completing Tax Return” is published each Income Tax year after the issue of Return of Income Form 11/Form 11E. 


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