Preliminary tax - which option?

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Maybrick

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As all self-employed people know, your annual tax return includes a payment of preliminary tax. The Revenue gives you an option - 90pc of this year's estimated tax bill (estimated by you, that is) or 100pc of the previous year's bill.

In the past, I have always gone for the 100pc option - mainly because it is simpler and Revenue cannot give you any hassle over how the figure was calculated. This year, however, my income for 2015 will be considerably down from 2014 and so the 100pc option would be a significant overpayment. I would presumably get it back this time next year, of course, but I still don't like the idea of my money resting in Revenue's accounts rather than my own.

Has anyone else been in this position? If so, do you think it is still worth taking the 100pc option just to absolutely sure of avoiding trouble with Revenue? Or has the 90pc option worked out fine for you?
 
Totally depends on the circumstances. Can you estimate your 2015 taxable income accurately? If you fall short of the 90% you can always file your 2015 as early as possible and pay the 2015 balance of tax due - this will reduce your interest exposure.
 
dublin66 said:
Totally depends on the circumstances. Can you estimate your 2015 taxable income accurately? If you fall short of the 90% you can always file your 2015 as early as possible and pay the 2015 balance of tax due - this will reduce your interest exposure.
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Thanks for the reply. I can estimate my 2015 income to within a few thousand and I am quite sure that paying 100pc of my 2014 bill would be significantly more than my eventual 2015 bill. This is why I would rather go with the '90% of this year' option.

Perhaps a good compromise is to put down a figure that is roughly 95% of what you ultimately expect the bill to be - that provides a bit of leeway and also ensures that you don't pay too much.
 
For a declining income, the 90% option makes sense. Just be prudent and build in some leeway along the lines that you've suggested.
 
What is the current revenue practice if you pay less than the option?
Are they actually applying interest?
 
Yes...back in the day it was rare to see an interest demand in such circumstances. Now, it's rare not to see one.
 
Really Gordon? I thought twas still fairly rare. Wonder what the stats are?
 
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