In response to a number of enquiries from clients here is a quick explanation of Preliminary Tax.

Preliminary Tax is an estimate of the Income Tax, Universal Social Charge (USC), and Pay Related Social Insurance (PRSI) that you anticipate owing for a specific tax year.

It’s important to note that this is only an estimation because you must pay it before your accounting year-end.

You must pay this by 31 October of the tax year in question.

You must make sure that you do not under pay your preliminary tax, or you may be charged interest. The amount of preliminary tax for a year must be equal to, or more than, the lowest amount of the following:

• 90% of the tax due for that tax year
• 100% of the tax due for the immediately previous tax year
• 105% of the tax due for the tax year preceding the immediately previous tax year (often called the ‘pre-preceding year’). This option only applies where you pay by direct debit. It does not apply if the tax due for the pre-preceding year was nil.

For late payments, you will be charged interest for each day (or part of a day) past the deadline.