Irish self-assessment has two parts: a balancing payment for the prior year, and a preliminary payment on account of the current year — both due by 31 October (or mid-November via ROS). Getting preliminary tax wrong is the single most common reason for unexpected interest bills landing in February.
What preliminary tax actually is
It's a deposit. You're paying tax on income you've earned (or are earning) in the current calendar year, before that year is even finished. The final return — which reconciles preliminary to actual — happens 10 months later.
The three calculation methods
- 90% of current-year liability — you forecast the current year's tax and pay 90% of it. Riskier: if you underestimate and pay less than 90% actual, interest accrues at 8% on the difference.
- 100% of prior-year liability — safe and simple. Works well if income is stable or rising. If income drops sharply, you've overpaid and will get a refund.
- 105% of pre-prior-year liability — only available if you pay by direct debit. Useful for smoothing volatile income. Note: the rule references the year two years before the current year, not the immediately prior year.
Worked example
Sarah, sole trader, year 2026:
- 2024 tax liability: €15,000
- 2025 tax liability: €18,000
- 2026 forecast liability: €22,000
Her three options for 2026 preliminary tax (payable 31 October 2026):
- Method 1: 90% × €22,000 = €19,800
- Method 2: 100% × €18,000 = €18,000 ← safest
- Method 3 (direct debit only): 105% × €15,000 = €15,750 ← lowest cash out now
Method 3 looks attractive but only because Sarah's income is rising. If it were falling, methods 1 or 2 might better reflect economic reality and avoid an unnecessary refund delay.
Direct debit: an underused option
Setting up Revenue direct debit for preliminary tax has two advantages:
- Unlocks the 105% pre-prior-year method (smoothing)
- Spreads the payment over the year rather than a 31 October lump sum (cash-flow friendly)
Trade-off: you commit to monthly payments and need to maintain ROS authorisation. We set this up routinely for clients with income volatility.
What happens if preliminary tax is wrong
If your preliminary payment is less than the lower of: 90% of actual current-year liability, 100% of prior-year, or 105% of pre-prior-year, interest at 8% per annum accrues from 31 October until the shortfall is paid. The interest isn't tax-deductible.
If you've overpaid, you'll get a refund or credit on the next year's preliminary payment — no interest paid to you, which is one reason not to over-pay just to be safe.
The 31 October vs mid-November ROS extension
Paper filers face a 31 October deadline. ROS filers get a moving target — typically mid-November, announced each year. Both the return AND preliminary tax must be filed/paid by the same date to qualify for the extension.
Corporation tax preliminary works the same way (with different dates)
For companies, the rules are similar but the calendar moves. Preliminary corporation tax is due on the 23rd of the month before the year-end (so 23 November for a December-31 year-end). "Small" companies (prior-year liability under €200,000) can use 100% of prior-year with no interest exposure — most Dublin SMEs qualify.
Not sure which method to use?
We run all three calculations for clients each September and recommend the optimal mix. Most save the fee in avoided interest in year one.
Plan Preliminary Tax Income Tax Service