Preliminary Tax for Self-Employed Individuals

All sole traders, self-employed individuals and individuals in a business partnership are liable to pay preliminary tax.

Preliminary tax is in essence an estimate of the tax you will owe on your next tax return. When you submit your tax return you should include payment for tax owed for the year of the return. In addition to this you should also make an estimate and pay the tax you owe for the following tax year, your preliminary tax. So for example on the 31st October 2013, individuals are required to file and pay income tax for 2012 but they should also have paid preliminary tax for 2013.

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). As the Revenue Commissioners will not know if the preliminary tax payment has been underpaid until the 2012 tax return is filed, interest cannot be applied until the 2012 return is submitted. Up until now, Revenue have been slow to levy interest on unpaid preliminary tax especially when the tax owing was ‘small’, under €10,000 in most cases. They do however have the power to do this across the board so being aware of your obligations around preliminary tax is important.

If you had no tax liability within a year then you have no preliminary tax payment to make. Also, if you started trading in 2012 and previously you only had employment income there is no preliminary tax payable for 2012.

Date published 23 Sep 2013

This article is intended to inform rather than advise and is based on legislation and practice at the time. 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 article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.