Preliminary Tax in Ireland: What Expats Need to Know

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Welcome to Taxbytes For Expats, the top tax tips you want to know as an expat. The podcast is here to help answer the common queries and concerns expats have when moving to or from Ireland.
Complex taxes explained simply. We’ll focus on the Irish and international tax issues to be aware of to ensure you save time, money, and stress.

Stephanie Wickham
Avoid the hassle of dealing with your bank and transfer online, by app, or over the phone on Currencies Direct today.
For Taxbytes For Expats listeners. But thanks to Currencies Direct for their support of this podcast.

Welcome to this episode of Taxbytes For Expats. We don’t have a guest today. It is a solo episode. We have been meaning to record some solo episodes that focus just on the Irish tax system, just on the issues that we see frequently with the clients that we work with that we think would be particularly useful for people who are either
planning for their move to Ireland, about to do their first tax return in Ireland, or perhaps recently arrived and unsure about how the system works and what they need to know about.

So, to that end, I’m going to talk about some of the housekeeping issues that come up when we work with clients in terms of perhaps the most important thing about the tax return process, which is the cash that leaves your bank account.
Pay it? What is the mechanism for paying it? And how do revenue expect you to settle your tax liability with them, specifically with respect to pre-paying your taxes?

So, by that, I mean I’m going to talk about preliminary tax. So, just to kind of zoom out a little bit and frame this for anybody who’s not familiar with the tax system in Ireland, a couple of key points that would be helpful.
Firstly, we have aCalendar tax year in Ireland, so January to December. Obviously, you determine your obligation to file a tax return.
I’ll talk a little bit more about that as we go through this episode. And when you have determined that you must file a tax return, you then have to be aware of the deadline by which you must do that.

So, if we look at the 2025 year, that would be the tax returns that we’re working on currently for our clients. That tax return is due by the 31st of October. October 2026.
So that’s a first point to be aware of is that we have quite a long lead in time to file tax returns, comparable to some other jurisdictions that we see our clients filing returns in.
But what’s interesting and the focus of today’s episode is that when somebody files their tax return for 2025, they must prepay their 2026 liability.
And that is a really important point for numerous reasons. Firstly, money is leaving your bank account.So, it always focuses an individual’s mind. Secondly, we need to be conscious of how we cash flow that.

In other words, has the individual been aware and planned for that payment? We don’t want any surprises. And thirdly, we need to be conscious of, well, what happens if we don’t get it right?
And that is important too, because obviously revenue expects that they’re going to receive an amount of money. If they don’t receive it, then they have a statutory ability to impose interest.
So, it can get expensive. Not getting your preliminary tax right can be expensive. So, that’s something that we want all of our clients to be aware of. Let’s talk about who needs to be aware about preliminary tax obligations.
So, I think the first thing to be aware of is preliminary tax, and this is income tax that I’m talking about here. It applies to somebody who is called a chargeable person.
That’s a definition in Irish tax legislation. Chargeable persons are people who have income greater than €5,000 that’s not taxed at source.

There can be other categories of people who fall into the definition, but the majority of our clients have income of over €5,000 that hasn’t been taxed at source. If you find yourself in this category, you need to determine whether or not you are a chargeable person because then you need to think about preliminary tax obligations.
In Ireland, we have a self-assessed tax system.And what that means is an individual is required to determine if they have to do something.

That’s simply what it means. So the onus is on you as a taxpayer to make yourself aware of your obligations and to meet them. And revenues, code of compliance will obviously penalise those who don’t do that.
Broadly speaking, the majority of chargeable persons will be, let’s use examples, an individual who has, let’s say, a UK rental property. Over €15,000, let’s say, in a given year, and they must report the profit for that rental property on an Irish tax return.

Let’s be very clear I’m talking about somebody who’s Irish resident and has to pay tax in Ireland on that income. And let’s say they have a tax liability of €2,000 for 2025.
They must also prepay their tax liability for 2026 when they are settling their 2025 liability.So, I’m going to talk about kind of how that works on an ongoing basis.
But I think, you know, what I’d like people to take away from this is, you know, do you have an obligation to file a return? And do you have an obligation to pay preliminary tax? You need to be aware of the answer to those two questions.

Other types of income that will also give rise to an obligation, like I just mentioned, would be foreign investment income, foreign pensions, state, governmental, private dividends, foreign.
Interest, as I mentioned already, rental income, as well as the plethora of other income types that are conceptually possible, but they are broadly the ones that we would see as the most common.
So, like I said, preliminary tax, you are prepaying your tax liability for the year ahead. So, if we kind of step through the example I gave there, an individual has UK rental income, they file a 2025 tax return, they pay their 2025 tax liability, and then they prepay their2026 liability.

So when we come to do the 26 return next year, essentially that tax bill should have been settled. Obviously, we don’t have a crystal ball. There could be a plus or a minus.
So when you file your return, your preliminary tax is taken into account. You are either owed a refund or you have an additional amount to pay. So why does it matter if we get preliminary tax right or not?
Well, the legislation is quite clear that when somebody makes a preliminary tax payment,They must meet certain thresholds in order to be considered to have met their obligations.
And sometimes in tax, these things can be a bit of a tongue twister. We can kind of trip over thresholds and what matters. So I’m just going to start this by saying, if you want to stop listening to this episode right now, the main thing to take away from it is if you’re paying preliminary tax and you don’t want any risks that you can underpay, base your preliminary tax for 2026 on your 2025.

Liability. So let’s go back to the example I used at the start. If we have a UK rental income with a liability of €2,000 in 2025, if an individual pays €2,000 in preliminary tax for 2026, they could be relatively confident that they’ve met their obligations.
There’s no interest risk. Everything’s fine. But the legislation does provide for other bases on which you can make a preliminary tax payment. And one of them advisors don’t like, well, I don’t like.
I don’t love it when clients base their preliminary tax on 90% of their expected liability. The legislation allows you to do that. So if Joe Bloggs, our fictional client who has UK rental income, says, Look, I know my rental income is going to be much lower this year.
I would like to base my preliminary tax on 90% of what I expect my liability to be. That is entirely possible. But the reason we don’t like doing it is because if, when it transpires, the return is lodged, if that has not beenMet interest can apply.

And that’s what we don’t like because obviously the interest rate that revenue charge is quite high. It’s about 8%. That can get expensive quite quickly. So, therefore, as advisors, we much prefer it when a client base their preliminary tax on 100%.
It’s a safe harbor. There is a third basis for preliminary tax that can be very useful for some clients and it is good to be aware of.
So, let me give you an example. If we have a client who has income,From a business, let’s use an example of a business because obviously income levels can change quite quickly. Business is doing well in year one.
Business is doing quite well in year two. And then we can start to see towards the end of year two, it’s taking off and all of a sudden our profits are very high in year three.
If an individual is struggling to cash flow their preliminary tax, in that scenario, there can be a mechanism by which you can base preliminary tax.
So, if I use 2025 as the year that we’re doing a return for, we can actually base preliminary tax on our 2023 liability, 105% of it, if an individual has made payments by way of direct debit.
And there are certain conditions that have to be met. But I think what’s important in this context is if you’re working with your advisor and your preliminary tax cash flowing is becoming problematic, there are other options.
They just have to be appropriate.In quite a specific way. The simplest thing to do was base it on 100% last year. That is not always possible.

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It would be useful for listeners to this podcast to know that Revenue have released by way of eBrief, which is how they generally communicate with the broader public, that the extended deadline for people who pay and file their tax liability via their Revenue Online service, the deadline this year is 18th of November.
So while you often hear us talk about the 31st of October as being the deadline, that deadline is extended. So most tax advisors are working to that 18th of November deadline.
The date then by which preliminary tax and your return should be lodged and paid for online. If you are transferring funds from overseas, if you are using a foreign bank to transfer to Ireland, you probably don’t want to leave it too late to start transferring amounts to Ireland.
Revenue will expect that the money has been transferred and that the return has filed by that extended deadline of the 18th of November where ROS is used.
Place now, earlier in the year, as to how we’re going to cash flow amounts, when amounts are going to be paid, so that we can make sure everything is in order. Obviously, as well, you need to think about foreign exchange risks.

Revenue accepts tax payments in euro only. So we need to be able to make payments via their system. They use the SEPA system, to the best of my knowledge.
And some non European banks don’t allow payments into that system. So again, administrative.Housekeeping issues, how are you going to pay your tax bill? And if you’re making transfers from abroad, you would obviously generally see clients transferring money to Ireland to an Irish bank and making payment from an Irish bank.
It’s just easier. One thing I do want to talk about that I generally bring up in conversations with clients in consults is we often have clients who will come to Ireland and work in a self employed capacity in Ireland.
So they will have their own business, variety of different clients that we work with, whether they beyou know, online marketers, they may be IT consultants, et cetera, et cetera. That doesn’t really matter.
What matters is they are earning income in Ireland and they must prepare and file an Irish tax return. And it’s very important, particularly when we’re dealing with clients, you know, we work with a lot of clients who come here from the US and they may be paying installments in the US.

So very correctly, they would be paying their tax bill in the US on a prepayment basis. And what we often say to them in a consult is, you know,Does that still hold?
Is that something that you should still do that needs to be confirmed with a US advisor? If we use my 2025 tax return, 2026 preliminary tax example, what we don’t like to see is that somebody approaches us in August of 2026 and says, I need to pay my 2025 tax bill.
And we then say to them, okay, that’s fine. Here’s your 2025 tax bill. Here’s your 2025 tax liability.year, you are not required under revenue guidelines to make a prepayment of preliminary tax.
Therefore, their 2025 tax bill, when they do their first return, is 100% of their tax bill and they have a prepayment of 2026. Because that very simply is essentially paying two years taxes at once.
And if an individual hasn’t a plan for it or b they have continued to pay instalments in the foreign country, we have cash flow problems. So generally with clients, what we’ll do in aConsult is to determine Ireland’s right under the relevant double tax agreement to tax the income.
Obviously, for residents who are working here, we know that they have an Irish tax bill in the majority of cases, and then do a small tax estimate earlier on in the process. Because for somebody who is generating income, and when we generate income, particularly from a self employed or independent contractor scenario, my personal viewpoint is it’s prudent to put your tax money away every month.
It just takes the stress out of tax time and it reduces the risk that you accidentally spend your tax bill and then have to come up with it later in the year.

So, as you can see, there are quite a few moving parts where someone is moving to Ireland partway through the year or leaving partway through the year. Obviously, preliminary tax is relevant.
Somebody who’s leaving may decide to pay a reduced preliminary tax amount, i.e., base it on 90% of their current share liability.We’re always quite cautious about that because we don’t want to see that an individual has underpaid and has the risk of interest.
Practically speaking, revenue have a statutory right to charge interest. We do see them do it. We can’t say confidently that it is always charged, but we should always expect that it could and might be.
So we always have to prepare for the worst. And that’s why, as advisors, we try to ensure that preliminary taxes are not charged. Obligations are fully considered. For the avoidance of doubt, preliminary tax doesn’t apply to capital gains tax.

So there is a separate payment system, to keep it simple, for CGT. And what that means is that if you have sold an asset between January and November of 2026, you must pay your CGT liability by the 15th of December.
And so if you are in that situation and you anticipate a sale or one has occurred and you’d like to reach out to us for support, please by all means do so. And then additionally, if youYou sell an asset and make a gain on which Irish CGT is due in the month of December, you will pay that portion of CGT in January of next year.
There have been calls in the industry for there just to be a consolidation. And, you know, we have different payment dates in Ireland for different tax heads. It can make it very difficult for non tax professionals to navigate the system, particularly when you’ve moved here from abroad.

But hopefully, some of that has been helpful. And what I’d like to leave you with is just an understanding of the importance.Of getting your preliminary tax obligations right.
But also, I suppose, the nuances that can kind of come into the payment when you are in a situation as an expat. So, to that end, if you have questions and you’d like our support, please do reach out to us info at expattaxes.ie.
If we feel your situation is straightforward, we will, of course, do our best to help. And if it is slightly more complex, as it often can be for individuals who are expats, we will suggest that you have a tax consultation.
With one of our team. And in that, we will obviously do our best to guide you as to what we think your expected liabilities might look like because nobody likes a tax surprise or a tax bill.

So thanks very much for listening to this episode. We will be releasing a few more bite sized episodes such as this with some topical tax issues that we think might be relevant in the run up to the tax filing deadline.
But please do reach out to us if you’d like us to cover any other topics. We’re very keen to create content that resonates.With our audience. Thanks for listening, and I will catch you on the next episode.

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Thanks for listening to Taxbytes For Expats. Please do leave a rating or review wherever you listen to your podcast.
And as always, remember to take professional tax advice specific to your personal circumstances before acting or refraining from action in connection with the matters dealt with in this series.
The material in this podcast is intended to give general guidance only.