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understanding Preliminary Tax

  • 01-11-2021 7:48pm
    #1
    Hedgecutter
    Registered Users, Registered Users 2 Posts: 1,054 ✭✭✭


    Hi im currently doing a tax return on a house i rent. This is my forth year or so doing a return. My accountant just emailed me with what i owe for 2020 but also said i owe Preliminary Tax for 2021.

    I justed wanted clarification on what Preliminary Tax is. My understanding is Preliminary Tax is an estimate for what tax i well pay next year for this year, and this is paid a year in advance (dont know why). When my tax is caluclated next year i well either owe a balance or nothing at all.

    If i pay 1500 Preliminary Tax for 2021, and my tax bill is 1600 next year i only pay 100 euro in 2021.

    If my tax bill is 1000 next year i owe nothing and have 500 in the taxmans bank for 2022.

    Would i be correct or would i be miles away from reality?

    Post edited by Hedgecutter on


Comments

  • #2
    Merrymac
    Registered Users, Registered Users 2 Posts: 32 ✭Merrymac


    As such Preliminary Tax 2021 is an advance payment of the Tax,PRSI and USC that you expect to owe for that tax year.(ie the current calendar year 1st Jan to 31st Dec 2021)

    To avoid being charged interest you must pay an amount that is equal to or greater than the lowest of 90% of 2021liability,100% of your 2020 liability or 105% of your 2019 liability (if paying by direct debit) Probably safest to pay 100% of 2020 bill.

    When you file your 2021 return next year the Preliminary Tax will be taken off the bottom line and you will pay the remaining balance due if any. If you have overpaid you will be refunded or you can request an offset against your 2022 Preliminary Tax as you will be due to pay that then.



  • #3
    Hedgecutter
    Registered Users, Registered Users 2 Posts: 1,054 ✭✭✭Hedgecutter


    https://www.boards.ie/discussion/comment/118104411#Comment_118104411

    Thanks



  • #4
    Furze99
    Registered Users, Registered Users 2 Posts: 11,392 ✭✭✭✭Furze99


    https://www.boards.ie/discussion/2058215968/understanding-preliminary-tax

    More or less correct. If you overpay Preliminary Tax, then you'll get a refund. Well I have anyway.

    I also don't worry too much about under declaring. Your income from letting may be fairly predictable but like many others I'd be guessing what'll come in between now and end of the year. I just pay something roughly in line with previous year and it all comes out in the wash at the end of the day.



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