In general, if you earn income outside the PAYE system in Ireland you are required to file a self-assessed tax return for every year you do so. A lot of people may find this confusing or stressful, here is our guide to try and help you understand the deep thoughts of the revenue.

Who will need to do this?

IF you are

OR have income outside your PAYE income in excess of €5,000, for example:

When do I need to file and pay my tax return by?

Self-assessment tax return & payment needs to be filed and paid by 31st October of the year following the tax year – revenue generally provide a few more days (up to middle of November – exact day is confirmed each year in advance by the revenue) for those using revenue online system (ROS) to file & pay their tax return. For all people required to file a tax return (see list above), all of their income for the relevant tax year must be included in their tax return for that tax year. For example, if you have sole trader income and rental income in 2020, both should be included in your tax return for 2020, which is to be filed and paid by 31st October 2021 (or middle November 2021 for ROS users).

For sole traders, the profit for their sole trader business for their 12 month accounting period ending in a given tax year is the figure that will need to be included in their tax return for that tax year. For example, a sole trader may prepare 12-month annual accounts from 1st September to 31st August each year – in this case, the profits from their trade for the 12 months ended 31st August 2020 is the profit to include in their tax return for 2020 which is due to be filed & paid by 31st October 2021 (or middle November 2021 for ROS users). The 12 month accounting period that applies to your business is the same 12 months each year i.e. while we would all love to do it, you cannot change the relevant 12 month period each tax year as suits you!

Preliminary tax, huh?

What is preliminary tax?

Preliminary tax is the estimate of Income tax, Pay Related Social Insurance (PRSI) and Universal Social Charge (USC) that you expect to pay relating to the current tax year. You have to pay this by 31st October (or middle November for ROS users) of the current tax year, usually at the same time you are filing and paying your tax return relating to the previous tax year. Using the example from above, if you have sole trader income with a 12 month year end 31^st August 2020, you are due to file and pay your 2020 tax return by 31^st October 2021 (or middle November 2021 for ROS users) – you are also due to pay your preliminary tax for tax year ended 31 August 2021 by that time i.e. by 31^st October 2021 (or middle November 2021 for ROS users).

Am I paying twice as much tax?

It might sound like a double tax payment, but the logic behind preliminary tax is to avoid self-employed individuals having a cash-flow advantage in paying their taxes as compared to PAYE workers – i.e. if there was no preliminary tax due each year, a self-employed sole trader would effectively be paying their tax 1 year in arrears the entire time, as compared to PAYE workers who pay their income tax each month through their payroll.

What happens if I don't pay?

If you underpay on your preliminary tax you can be charged interest. If you are late in paying you will be charged interest for every day or part of day you are late. This is why an accountant is helpful in doing a self-assessment tax return.

How do I file a tax return?

You can pay and file a tax return through Revenues online service (ROS). With ROS your self-employed tax deadline is extended to mid-November. If you file by paper it is the 31st of October.

In order to successfully file and pay your tax on time each year you must have:

1.Paid your preliminary tax for that year

2.Filed your tax return and self-assessment for the previous year

3.Paid any balance on income tax from the previous year

You can use an expert tax agent such as SCK group to help you through all these steps and help you to avoid any revenue penalties for inaccurate or late filings

What is a tax agent?

A tax agent is a company or person, such as SCK group, who can advise you and submit tax returns on your behalf. They will also have access to your ROS account and are authorised to liaise with the revenue on your behalf.

The benefit of having a tax agent will mean less of your time will be taken up trying to compute how much tax you owe, we will also ensure you claim all allowable tax reliefs, tax credits and deductible expenses so that you pay no more tax than you have to.