Preliminary tax is in essence an estimate of the tax you will owe on your next tax return.
In order to fulfil your preliminary tax obligations in respect of your 2015 income tax return a payment should have been made along with the filing of your 2014 Income tax return in October 2015.
You had three options when deciding what level of preliminary tax you should have paid in October 2015 which are as follows:
- Based upon 100% of your 2014 tax charge.
- Based upon 90% of your 2015 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 (2013). 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 (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.
If you feel that you have underpaid your preliminary tax you should contact your accountant to calculate what level of payment should be made.
While a payment at this stage does not prevent Revenue imposing interest they may look favourably on a taxpayer who rectified the oversight in a timely manner.
Your local TaxAssist Accountant can assist you in calculating the correct amount of preliminary tax to pay. Call today for a free initial consultation.
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.