Fergus O'Dowd (Louth, Fine Gael)
Link to this: Individually | In context | Oireachtas source

265. To ask the Minister for Finance if he will respond to correspondence received (details supplied) in relation to preliminary tax; and if he will make a statement on the matter. [28321/20]

Paschal Donohoe (Dublin Central, Fine Gael)
Link to this: Individually | In context | Oireachtas source

I am advised by Revenue that since the introduction of the pay and file system, self-assessed income taxpayers, including those whose self-assessed liabilities arise from rental income, have been required to pay annually both preliminary tax for the current year and any balance of tax owing for the previous year. The payment is due by 31 October in a year, or later if paying online via the Revenue Online Service (ROS).

The amount of the preliminary tax payment is

- 90% of the current year’s liability;

- 100% of the prior year’s liability; or

- 105% of the tax due for the tax year preceding the immediately previous tax year (often called the ‘pre-preceding year’).

The “pre-preceding year” option only applies to taxpayers paying by direct debit. Taxpayers not paying by direct debit can choose the lower of the other two options.

The other part of the payment – the balance of tax owing for the previous year – is the difference between the liability based on the individual’s self-assessed income tax return, and the preliminary tax paid last year.

Revenue has extended the deadline for customers to file their 2019 self-assessed income tax return and make the appropriate payment in respect of preliminary tax for 2020 and any income tax balance due for 2019. The due date has been extended by four weeks from 12 November 2020 to 10 December 2020. To qualify for the extension, customers must both pay and file through ROS; otherwise the relevant return and payment is due no later than 31 October 2020.

In the correspondence provided, the person seems to think that preliminary tax is a pre-payment of next year’s liability and the preliminary tax system discriminates against the self-assessed taxpayer compared to a PAYE taxpayer. This is not the case; the preliminary tax due this year is a preliminary tax payment for this year, 2020. With the extended deadline this payment is due by 10 December. A PAYE taxpayer will have paid his or her liability through 2020.

In most cases individuals will not be paying the full amount of two years’ income tax liabilities (previous year and current year) at once, unless they paid no preliminary tax in the previous year and based on their self-assessed income tax return they now have a liability for that year.