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02-02-2019 - - 0 comments
SYOB - Income Tax and Preliminary Tax

Pay and File System provides the facility for you, on a single due date - 31 October, to:

  • Pay your Preliminary Tax for the current year,
  • File your tax return and self-assessment for the previous tax year, and,
  • Pay any balance of tax due for the previous year.

Preliminary Tax liability can be based on either 90% of your actual tax liability for the current year or 100% of your tax liability for the previous year. As people do not know their liability for the current year, it is generally recommended to pay 100% of the previous year's liability, if possible, to guarantee no additional surcharges or interest. Preliminary Tax is essential to plan for ref cashflow in a small business -Have a look at a working example

Joe Bloggs Example - On 31st Oct 2013, Joe Bloggs completed his accounts for year end 2012 and showed an Income Tax bill of €12,000

However, he had already paid Preliminary tax of €12,000 on 31st October 2012

Therefore he has no liability for Income tax on 31st Oct 2013 ......but he will have to pay €12,000 for Preliminary Tax  on 31st Oct 2013 which relates to the following year ie 31st Oct 2014

On 31st Oct 2014, Joe Bloggs completed his accounts for year end 2013 and showed an Income Tax bill of €18,000

He must pay €6,000 to settle 2014 Income Tax and another €18,000 for 2015 Preliminary Tax (100% of 2014 liability)

 This is an amount totally €24,000 payable to the Revenue on 31st Oct 2014

Preliminary tax can be difficult to manage. You have to pay 100% of your tax liability despite the fact that you have not finished you trading year, which puts a strain on cashflow and needs to be planned for. You can do this by doing your tax return early and be able to plan to have the money to pay your tax bill.

Please note that you can set up a standing order to pay tax to Revenue on a monthly basis. The idea is that you can pay any balance owing at the end of the year when you submit your final tax return.

A very common question is "do I have to register if I am only earning a small amount?"

Form 12 - The Revenue define a chargeable person is an individual with a NON PAYE source of income over €5,000. If you earn income from a business under the amount of €5,000 you are not regarded as a 'chargeable person' for the purposes of Income Tax Self-Assessment - Form 11

You should complete a Form 12 Tax Return and Self-Assessment in myAccount The eForm 12 allows you to complete a return of your income and claim tax credits, allowances and reliefs (including any health expenses) electronically for the each year since 2013

RevAPP

In December 2016, Revenue launched 'RevApp' a free mobile app (Apple and Android) to help Sole Traders manage their tax affairs on the go.

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