What exactly is preliminary tax 90% based on?

I'm PAYE worker and have ETF gains and so I need file form 11.

At the end I have a Income tax Balancing Amount 2023 as 510 euro. So does the "100% of 2023’s liability" means this balancing amount of 510, so my preliminary tax for 2024 is 510?

Or is it some other figure from the rest of the tax return?



i used to think it's the balancing amount, but not so sure now, because the balancing amount includes preliminary tax as well!




Which would imply this weird situation where this year for e.g. I pay 510 as preliminary for 2024.

Then next year when I file in 2025, imagine i'd have another liability of 510 for 2024 before preliminary tax is subtracted and so then I'd have Income tax Balancing Amount 2024 as zero once preliminary tax is subtracted... so then for preliminary tax for 2025, i'd pay zero? if we just take preliminary to be Income tax Balancing Amount 2024, it would be zero?

Then next year after when i file in 2026, imagine 'id have another liability of 510 for 2025. Since I paid no preliminary tax in 2025 as per above, I'd have a Income tax Balancing Amount 2025 as 510 again, which would prompt me at that stage to pay 510 as preliminary tax for 2026.

In essence it seems if I just keep using Income tax Balancing Amount to estimate my preliminary tax, since the Income tax Balancing Amount itself includes last year's preliminary tax, you get into this weird oscillation where one year you pay preliminary tax, next year you pay no tax, then year after you pay preliminary again.... which doesn't seem like it should be like that?

But then if it's not Income tax Balancing Amount that is use to estimate preliminary tax, then what is?

I don't think I need pay all of my PAYE income as preliminary tax, since I never had to before and by my understanding the whole point of PAYE is that since you pay as you earn, you don't have a net tax liability outstanding at the end of the year, since you already paid it and hence no preliminary tax is due on that.

So that's why I assumed preliminary tax is simply what you pay if you actually have a net liability outstanding at the end of the year (Income tax Balancing Amount)- i.e. you had some income beyond PAYE, for which you never paid tax and now you need to pay it. But because the net liability also includes preliminary tax, it just makes this weird oscillation every year that doesn't seem right to me either.

So do I just ignore this Income tax Balancing Amount 2023 and go back and dig into my Form 11 and try figure out and separate out my PAYE income from ETF tax due and pay w.e. is due for ETF tax specifically as preliminary tax or...?

Thanks

Show us the screen before the one you posted. It will show your total tax liability for 2024. You have to pay 100% of that in preliminary tax.

Total liability for 2023 you mean.

Print view page:




It Self Assessment page:




See for example just to play around with the form, if I put in 100 euro for (h) Amount of tax, including Preliminary Tax, paid directly to the Collector General for this period here, it would reduce (j)(i) Balance of Tax Payable for this period to 410 euro, which would then also reduce the Income Tax Balancing Amount 2023 to 410 euro






So that made me think I probably need to use some other value than Income Tax Balancing Amount 2023 to base my preliminary tax for 2024 off of, that is some value before any preliminary tax is applied to 2023. Perhaps (d) Amount of tax payable for this period ?




I just thought there must be some easy way to get that value without having to dig deep and hard into internals of the Form 11...

Interestingly the total liability on print view page stayed as 510 even though balance payable was changed to 410. So perhaps that's a source of truth?




But im not 100% sure because when i tweak the IT tax to get 410 balancing payment i got this warning here about disagreeing values. So perhaps the 510 in total liability is just the system insisting revenue value was correct (even though it still saying 410 on balancing payment page)?

I usually just pay my estimated liability for this year...

Click to expand...

This year is 2024. To pay estimate of "this year" (2024), you need to estimate what tax you will owe for this year (2024) and use 90% of that.


In practice this is much much more difficult to estimate and so most people op to use 100% of the tax due for the immediately previous tax year - which is 2023.

When you file in 2024, you're filing 2023 liability and so it should be in theory "easy" to tell what 100% of that liability is. I'm just getting hung up on the which value from my 2023 to use as 100% for my 2024 preliminary tax.

I will have paid Preliminary Tax to cover the €12,000 so I usually have a small balancing payment or refund.
But if I opt to pay 100% of my liability for last year, is it the €12,000 I pay?

Click to expand...

So (I'd like if anyone else could confirm), but by my understanding is that your total liability for 2023 (before any preliminary tax that you have already paid in 2023 is subtracted) is 12000 right. So 100% of 2023 liability, which is now the preliminary tax to be paid for 2024, is 12000.

Could you confirm if your current return actually includes a preliminary tax payment for year 2023 at all? It should then reduce the balancing payment to something less than 12000 (something much smaller you mentioned)?

Sorry with all the questions but i never paid preliminary tax before, so just figuring this out as I go but I imagine this is how it works with your figures as example:

You have a liability for 2023 that is 12000. let's say e.g. you also paid preliminary tax of 9000 in 2023. So the balancing payment for 2023 is 3000. The preliminary tax for 2024 would then be 100% of 2023 liability, which i think means 12000. (I used to think it meant 3000)

So now i'm just trying to figure out which figure should be used in that example, 9000 or 3000...

If you are paying tax by PAYE, then I think that the preliminary tax only refers to any non-PAYE tax due

Otherwise you would end up paying all your tax twice over

Under PAYE, you pay the 2024 tax due on your PAYE income during 2024

The Preliminary tax is to capture the tax due on non-PAYE income during 2024 and ensure that at least 90% is paid before the end of the year

I wouldnt bother - It's a tiny amount and revenue in my experience wont bat an eye

jpd said:

If you are paying tax by PAYE, then I think that the preliminary tax only refers to any non-PAYE tax due

Otherwise you would end up paying all your tax twice over

Under PAYE, you pay the 2024 tax due on your PAYE income during 2024

The Preliminary tax is to capture the tax due on non-PAYE income during 2024 and ensure that at least 90% is paid before the end of the year

Click to expand...

Yes I have some non PAYE income, ETF gains as mentioned. So do I use the Total Liability Payable figure from the print view or the Income Tax Balancing Amount 2023 figure on the last page?

I know in my case both are 510, but they could be different if I had any preliminary tax paid last year. E.g. if i paid 100 preliminary tax last year, then my Total Liability Payable is 510, but Income Tax Balancing Amount 2023 would be 410.

So which of those two figures shall be used for preliminary tax for 2024 as "100% of 2023 liability"?

Thanks

It is 100% of the amount of tax payable for 2023 after factoring in withholding tax paid in the course of 2023, but before factoring in the 2023 pre-payment made when making the 2022 return.