Question Re Preliminary Tax

Swyper

Registered User
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I am a PAYE employee, and my wife started a business in 2015 for which we submitted a Form 11 tax return in February 2016. We also own a rental property. Yesterday I paid the small outstanding tax bill that was due - c. 350 euros.

The thing is I am looking at our obligations and it looks like as a sole trader, she should be paying preliminary tax by the end of October 2016 for October 2016. But I have no idea how to calculate it. Some of the guidance suggests that we should pay the same tax as last year, but in 2015 while we paid 350 euros, if it hadn't been for health expenses and other deductibles, the tax bill would have been higher.

Just as a guideline, in 2015 she took in gross receipts of 12,385, less expenses of 3,226, leaving a net profit of 9,159, adjusted up to 9,473 to take into account 50% personal mobile phone usage.

So, if it weren't for other deductibles, I think her portion of the tax liability would have been around 20% of that. Is that what I should use for the preliminary tax return in 2016?

Any help appreciated.
 
You can calculate preliminary tax in 2 ways:
1) the 100% rule - where you pay the same you paid for the previous year
2) pay at least 90% of what your final liability for the year will be
See http://www.revenue.ie/en/tax/it/leaflets/it10.html#section4

So there is no issue with you just paying preliminary tax for the year 2016 equal to the small amount of tax you paid for 2015 (100% rule).
This will defer the majority of your final 2016 tax bill & keep the money in your pocket longer. However, the flip side of course is that the tax amount paid out in Oct/Nov 2017 will be larger, because you will need to pay both most of the 2016 and (preliminary) 2017 tax together at that point.
 
Is the €305 figure 100% of the tax due on the profits of the business in 2015?

I think it is just the outstanding liability on the salary, the rental income and the business after paye was paid.

The tax due on the business is more like the 20% of €9,473. I think !
 
The 350 euro figure was the net outstanding tax liability from both our incomes including PAYE, rent and self-employed income. Without her self-employed income we would have been due a refund.

I agree that's something like 20% of 9,473. Her income will be slightly higher this year, so I'm fine to pay the 100% of 2015. I just need to figure out what that figure is. Maybe it's as simple as 20% of 9,473, but wondered if anyone knew for certain.
 
Just to experiment, I used ROS offline to hypothetically remove my wife's self-employed income for 2015, and in that case we would have been due a refund of 2011 euros. Which means that my wife's self-employed income contributed 2,361 of a tax liability or roughly 25% of her profits. So, this includes some PRSI and USC as well as income tax liability. Maybe that's what I put down for 2016 prelim?
 
It is 100% of the net tax liability after tax credits plus 100% of the PRSI and USC on the none paye income as calculated on the income tax assessment. Once you meet the minimum of the 100% for the previous year you are covered and you can always overpay this amount if you think the liability for 2016 will be higher, the 90% of the current year option is usually only chosen if there is a significant drop in income from the prior year or where someone has ceased to trade in the year.
 
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