Preliminary tax includes PAYE Income

D

Douglas

Guest
I have a question regarding the preliminary payment for 2004. Last year, my Dad had to pay preliminary tax (pt) on his PAYE income as well as self employed income (as advised by revenue). At the time, I thought that this was unfair and given tax was being deducted on paye income and also paying this tax again in pt for 2003. This year, I am more certain that this guidance was incorrect. Can anyone clarify, if you're preliminary tax should include paye income amounts?

Thanks in advance
 
paye

In my experience yes.

You're returning income from all sources. The first return I made I didn't include any PAYE credits etc. but just the figure, I got a shock when the assesment came. I naively thought revenue have all that info.!! It seems strange given that you get a P-60 and everything is deducted at source. But of course employers can get it wrong.
 
Douglas, I think you are a bit confused.

Take the following simplified example.

You earn 20K gross PAYE income (on which you have paid 2.5K PAYE tax) and 2K profit from self employment.

Say your total tax liability for the year is 3K. You have alrady paid 2.5K tax so your outstanding liability for the year is .5K and this is also the figure on which you should base your preliminary tax payment for the following yr. There is no need to pay the 3K as you would be grossly overpaying tax in that situation.

Hope this helps.
 
income tax

The key thing is that you have to fill in the PAYE amounts earned and tax paid on the return i.e 2003. Don't assumen they know about them even though your employer returns them!!

Of course for the preliminary tax just make a rough guess on what the tax on additional income is as PAYE should balance out if the employer has a proper system.

The best guide to calculation for the return (2003) is ironically the assesment you should have received from the previous year (bright yellow with loads of figures). I copied the calculation method into a spreadsheet and now use it every year.
 
Re: income tax

The best guide to calculation for the return (2003) is ironically the assesment you should have received from the previous year. I copied the calculation method into a spreadsheet and now use it every year.
Click to expand...
You should take note that many assessments contain errors. If you are using an assessment as a basis for calculations, make sure you are no errors on the assessment you are using. (Under the self-assessment system, the taxpayer is responsible for accurate preparation of returns and payment of correct liabilities.)

Beware also of changes in tax allowances, bands, credits etc from year to year - not many between 2002 & 2004 admittedly but in some years there are radical, and often subtle, changes
 
assesment

Yes fair point Tommy.

I was talking more about the methodology than the exact bands and allowances. For those who are no incorporated and have a relatively simple situation a spreadsheet which follows the method can be useful, i.e. gross income, deductions, witholding tax, preliminary tax paid etc.
 
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