Preliminary Tax

Q. What is preliminary tax and do I have to pay it?  

13th October 2017

A. Preliminary tax is, in essence, an estimate of the tax you will owe on your next tax return.

In order to fulfill your preliminary tax obligations in respect of the 2017 income tax year, a payment should be made along with the filing of your 2016 Income tax return in October 2017.

You have three options when deciding what level of preliminary tax you should pay in October 2017 which are as follows:

  • Based upon 100% of your 2016 tax charge.
  • Based upon 90% of your 2017 tax charge (this will need to be an estimate at the time of filing the return).
  • 105% of your final tax charge for the pre-preceding tax year (2015). This option is only available where preliminary tax is paid by monthly direct debit.

If you fail to pay preliminary tax or underpay the preliminary tax Revenue may charge interest on this late payment. This interest is calculated at 0.0219% per day (circa 8% per annum).

In the past Revenue were slow to apply interest to underpaid preliminary tax, especially where the amounts involved were quite low. There has been a marked increase in recent times, however, of Revenue enforcing these powers and applying the interest charges.

Disclaimer: Advice shared in this blog is intended to inform rather than advise. Taxpayer's circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this forum, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.

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Call us today to make an appointment at your local office

1890 98 76 09

Or submit an enquiry