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Why do I have to Pay Preliminary Tax?

Apr 24, 2017

Do you ever feel like you’re constantly paying tax? You’ve just paid for last year and now Revenue is asking for a payment for next year! Of course, remaining tax compliant is of utmost importance so you pay the liability – but every year you ask yourself…

What exactly is this payment for? What happens if I don’t pay? And when does it need to be paid by?

This is known as Preliminary Tax, and all taxpayers, whether a self-assessment individual or a company, are liable to pay it. Preliminary Tax is calculated on either:

  1. 100% of your previous year’s liability, or
  1. 90% of your current year liability, or
  1. 105% of your pre-preceding year’s liability.

As estimating the current year’s liability can be both time-consuming and costly the majority of clients opt to pay 100% of the previous year’s liability.


What happens if I just don’t pay?

If you fail to return and pay your Preliminary Tax then you are liable to a series of penalties, interest and surcharges. The interest alone is charged at a daily rate of 0.0219%, and in addition to this a surcharge of 5% - 10% may be applied.


When Preliminary Tax due to be paid?

Preliminary Tax is due to be paid as follows:

1. Individuals

Self-assessment taxpayers are required to file and pay their Income Tax and Preliminary Income Tax liabilities as follows:

Income Tax Year ending 31st December 2016 File and Pay your Income Tax by 31st October 2017
Preliminary Tax for 2017 File and Pay Preliminary tax by 31st October 2017

Of course the above deadline may be extended to 10th November 2017 if you opt to file and pay using Revenue’s Online System (ROS).

2. Companies

The Preliminary Tax return and payment, for companies, is due 11 months after your accounting year end. For example, if the accounting year end is 31st December 2016:

Accounting Year-end 31st December 2016
Corporation Tax Deadline September 2017
Preliminary Tax Deadline November 2017

Don’t Forget!!

Even if you did not have a tax liability you may still be required to file a Nil Preliminary Tax Declaration on ROS.

If you are unsure about your tax obligations, or require assistance calculating your liability, please do not hesitate to contact a member of our team, they’ll be happy to help!

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