Preliminary Tax - yet another thread

[Stone92]

Hi folks,

First of all, reading you has been super helpful.

I am trying to understand Preliminary Tax in the form 11. My first ever.
In year 2021 I was PAYE and Sole trader, and turns out that Revenue has calculated that I am due a refund (aka overpaid tax because I paid too much as PAYE). Essentially, with all the tax credits I do not have to pay any tax for work carried out in 2021.

The issue is, what about preliminary tax? I understand I now need to pay "100% of tax of tax liability of 2021" as a preliminary payment for 2022, and I understand this would be zero; because I am not due anything (total tax liability = overpaid). I will just give an example with some fake numbers below (I know they do not add up well, they are made up):

Computation of final liability
Income Tax 2500
USC due self 80
PRSI due self 250

Total amount of tax chargeable for this period 2830 <- This is not what I need to pay for 2021, nor the amount of preliminary tax for 2022, correct?

Less
Credits set against income tax (shown above) 2500
Additional Credits / Reliefs
Paid PAYE 600
Universal Social Charge deducted under PAYE 130

Total credits / reliefs 3230

Total Liability
Overpaid 400 <- This is the amount to pay for preliminary tax, am I right? But since it is a refund, preliminary tax would be 0?


I know we are all Internet strangers, and I queried revenue about this; but any other point of view would be appreciated. Thanks folks.

 

[T McGibney]

I am trying to understand Preliminary Tax in the form 11. My first ever.
In year 2021 I was PAYE and Sole trader, and turns out that Revenue has calculated that I am due a refund (aka overpaid tax because I paid too much as PAYE). Essentially, with all the tax credits I do not have to pay any tax for work carried out in 2021.

The issue is, what about preliminary tax? I understand I now need to pay "100% of tax of tax liability of 2021" as a preliminary payment for 2022, and I understand this would be zero; because I am not due anything (total tax liability = overpaid). I will just give an example with some fake numbers below (I know they do not add up well, they are made up):

Your understanding is correct, ie you have no Preliminary Tax liability for 2022.

Does this answer your question?

 

[jpd]

The Revenue site is quite clear on the matter, I think

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.

 

[Stone92]

Your understanding is correct, ie you have no Preliminary Tax liability for 2022.

Does this answer your question?

Absolutely. Thank you.
In retrospective, I see the question was probably too simple. However, as a first timer it always feels threatening to click those Form 11 buttons and the fear of messing things up is always there. Thanks both of you for (you and jpd) your point of view. Much appreciated.

 

[bstop]

as a first timer it always feels threatening to click those Form 11 buttons and the fear of messing things up is always there.

If you make a mistake on the form 11 return you can submit an ammended form 11 to correct the error.