Preliminary Income Tax by Direct Debit

January. The Time for New Year’s Resolutions!

By paying your Preliminary Income Tax by Direct Debit this year, you will improve your cash flow planning by spreading your payments to a twelve-month period and with the advantage of avoiding the one-off payment in October.

Preliminary Tax

Preliminary Tax is your estimate of tax and related charges payable by you for a tax year and must be paid by 31 October in the year in question. In calculating your Preliminary Tax payment you should ensure that it covers your liability to PRSI and Universal Social Charge, as well as Income Tax.

To avoid interest charges, the amount of preliminary tax paid for a tax year must be equal to or exceed the lower of:

  • a.90% of your final liability for the tax year, or
  • b.100% of your final liability for the previous tax year, or
  • c.105% of your final liability for the pre-preceding tax year. (This option is only available where preliminary tax is paid by direct debit. It is not available where the tax payable for the pre-preceding year was nil.)

Direct Debit

  • You can make arrangements with the Collector-General to pay your Preliminary Tax by Direct Debit.
  • This scheme is designed to spread the burden of payment of Preliminary Tax throughout the tax year. Direct Debit is particularly suitable for people who receive their income at regular intervals such as weekly or monthly. It avoids having to pay a lump sum in October each year.
  • To avail of Direct Debit you must complete and sign an instruction, which allows for agreed monthly deductions from your bank, which are in turn credited to your tax account(s).

The Next Step

Please get in touch with us if you think that the Direct Debit approach would be suitable for you.

Maura Duffy, Partner - HLB Sheehan Quinn

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