A Guide to Self Assessment - IT10

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Introduction

This booklet sets out the basic principles of the Self-Assessment system as it applies to Income Tax and Capital Gains Tax. It aims to answer many of the questions that arise when individuals find that they are chargeable to tax under Self-Assessment.

Income Tax Self-Assessment

Self-Assessment applies for Income Tax purposes to:

  • Self-employed persons (i.e. people carrying on their own business including farming, professions or vocations)
  • Persons receiving income from sources where some or all of the tax cannot be collected under the PAYE system, for example:
    • profits from rents,
    • investment income,
    • foreign income and foreign pensions,
    • maintenance payments made to separated persons or where civil partnerships are dissolved,
    • fees and other income not subject to the PAYE system,
    • profit arising on exercising various Share Options/Share Incentives.

For information on the amount of income that can be coded under the PAYE system, please refer to Tax Briefing No. 62 (issued December 2005) which includes an article on the definition of "chargeable person" and is available at www.revenue.ie.

Under Self-Assessment there is a common date for the payment of tax and filing of Tax Returns, i.e. 31 October. This system, which is known as "Pay and File" requires you to file your return and pay the balance of tax outstanding for the previous year at the same time as you are required to pay preliminary tax for the current year.

How do I register for Self-Assessment?

You must advise your local Revenue office when a source of income (other than PAYE income) commences. You can do this by completing pdfForm TR1 - Tax Registration form for Sole Traders, Trusts and Partnerships (PDF, 1MB). Form TR1 is for an Individual, Sole Traders, Partnerships, Trusts and Unincorporated Bodies requiring to register for:

  • Income Tax,
  • Employers PAYE/PRSI,
  • VAT,
  • Relevant Contracts Tax (as a Principal Contractor).

When you register for self-assessment with Revenue you will automatically become registered for PRSI purposes with the Department of Social Protection.

The most effective way to deal with your tax affairs is through Revenue On-Line Service (ROS) available at www.revenue.ie. By accessing ROS you can familarise yourself with its many features and register to become a ROS customer thereby enabling you to file returns and make payments electronically. (See also section on Mandatory Requirement to file Tax Returns electronically).

What Tax Number will I use?

You must use your Personal Public Service PPS) Number when completing your tax registration form.

If you do not have a PPS Number you should contact your local Department of Social Protection office who will advise on the procedure for obtaining your PPS number. Leaflet SW100 'Personal Public Service Number' issued by the Department of Social Protection gives further information on how to obtain your PPS Number. The leaflet is available from your local Department of Social Protection office and on the Department's website at www.welfare.ieExternal link

Your PPS Number is very important so you should keep a permanent record of it and always quote the number when contacting your Revenue office.

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Pay and File System

The Pay and File system provides the facility for you, on a single due date – 31 October, to:

  • Pay your Preliminary Tax for Income Tax purposes for the current year,
  • File your tax return for the previous tax year for Income Tax and Capital Gains Tax, and,
  • Pay any balance of Income Tax due for the previous year.

The due date of 31 October is also known as the specified return date.

An important point to note is that if you are filing a paper tax return for the previous tax year and wait until the Pay and File deadline of 31 October to do so, you will need to do your own calculations of your tax liability for the year in question. However if you file the paper tax return before 31 August (early filer) Revenue will issue a tax assessment notice for the previous year in advance of the 31 October deadline. This will save you having to calculate your liability for that year and you will have certainty of the balance of tax payable for the previous year. You will also be in a better position to decide on the preliminary tax payable for the current year.

Submitting your tax return form early will not result in Revenue seeking payment of tax before it is due.

Submitting Tax Return and Making Payments by 31 October

All payments should be identified separately and then aggregated on a single personalized payslip (provided with your tax return) and the return and payment should be filed either –

  • On-Line – using the Revenue On-Line Service (ROS), or
  • By post to the Office of the Revenue Commissioners, Collector-General's Division, PO Box 354, Limerick, to arrive on or before 31 October.

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Preliminary Tax

Preliminary Tax is your estimate of Income Tax and related charges payable by you for a tax year and must be paid by 31 October in the year in question. In calculating your Preliminary Tax payment you should ensure that it covers your liability to PRSI and Universal Social Charge, as well as Income Tax.

To avoid interest charges, the amount of preliminary tax paid for a tax year must be equal to or exceed the lower of:

  1. 90% of your final liability for the tax year, or
  2. 100% of your final liability for the previous tax year, or
  3. 105% of your final liability for the pre-preceding tax year. (This option is only available where preliminary tax is paid by direct debit and does not apply where the tax payable for the pre-preceding year was nil).

Preliminary Tax for 2011 and the Universal Social Charge

Preliminary Tax for the tax year 2011 is due on or before 31 October 2011. The Finance Act 2011 introduced changes to the 100% rule in calculating preliminary tax for 2011. Where an individual wishes to pay preliminary tax on the basis of 100% of the previous year’s liability, his or her preliminary tax payment for 2011 is to be based on the final liability for the year 2010 as if the Universal Social Charge had been payable and as if the Income Levy and Health Contributions had not been payable for that year.

Universal Social Charge

The Universal Social Charge (USC) came into effect on 1st January 2011. It replaced both the Income Levy and the Health Contribution. It is a tax payable on gross income, including notional pay, after relief for certain capital allowances, but before pension contributions. There is an annual exemption threshold of €4,004 and where this amount is exceeded, all of an individual's income is chargeable. The rates of USC are:

  • 2% on the first €10,036,
  • 4% on the next €5,980,
  • 7% on the balance.

However, these standard rates are modified in certain circumstances. In the case of individuals aged 70 or over, and individuals who hold full medical cards, the 4% rate applies to all income over €10,036.

There is a surcharge of 3% on individuals who have income from self-employment that exceeds €100,000 in a year, regardless of age. Thus, where such individuals are under 70 years and do not hold a full medical card, a rate of 10% applies to such income and where such individuals are aged over 70 years or hold a full medical card, a rate of 7% applies.

There are a very limited number of exempt categories. The more important of these include:-

  • all Department of Social Protection payments and similar payments received from other countries,
  • Department of Social Protection-type payments received from State Bodies such as the HSE and FAS,
  • income already subjected to DIRT.

More information on the USC can be found on www.revenue.ie.

Income Levy

The Income Levy, which came into effect on 1 January 2009, was a levy payable on aggregate income, including notional pay, before any relief for any capital allowances, losses or pension contributions. The Income Levy ceased with effect from 1st January 2011.

Health Contribution

Health Contribution ceased with effect from 1st January 2011.

When and how do I pay my Preliminary Tax?

Preliminary Tax must be paid on or before the 31 October every year. You can pay your Preliminary Tax as follows:

  • Have the amount, which you specify deducted directly from your bank account by completing the Single Debit Authority on the payslip provided with your tax return.
  • Through the Revenue On-Line Service (ROS).
  • Through Bank Giro, by making the payment through any bank.
  • By Direct Debit.
  • By cheque payment sent to the Collector General's Division.

Making Payments under Self-Assessment for the first time

If you chose the option to pay Preliminary Tax of 100% of the previous year's liability, a payment of Preliminary Tax may not generally be required for the first year in order to avoid interest charges. However, if you do make a payment of Preliminary Tax in the first year, this will reduce the amount and number of tax payments that you will be required to make subsequently. If, for example, your tax affairs for the previous tax year were dealt with under PAYE and you commence as a self-employed person in the current tax year, you can make a payment of Preliminary Tax on 31 October of the current year.

What happens if I don't pay my Preliminary Tax on time?

If you don't pay your Preliminary Tax by 31 October or if you don’t comply with your direct debit arrangement or if the amount of Preliminary Tax you pay is too low, you will be liable to an interest charge. The due date for the payment of your full tax liability or the balance of tax due is backdated to the date the preliminary tax was due, i.e. 31 October in the actual year of assessment. Interest is due, on late payments of tax, for each day or part of a day at a rate of 0.0219% from 1/7/2009.

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Direct Debit

Preliminary Income Tax payments can be made by way of direct debit monthly payments. This scheme is designed to spread the burden of payment of Preliminary Tax throughout the tax year. Direct Debit is particularly suitable for people who receive their income at regular intervals such as weekly or monthly. It avoids having to pay a lump sum in October each year. See Direct Debit Online for further information.

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Other Methods Of Payment

  1. Single Debit Authority enables you to make once- off payments directly from your bank account by completing your bank details and a debit amount on payslips attached to:
    • Income Tax Pay & File notice of assessment,
    • Capital Gains Tax Pay & File notice of assessment,
    • Return of Income Form 11,
    • Return of Income Form 11E.

    Payments through Single Debit Authority, receive credit on the day of payment similar to those made through the Revenue On-Line Service (ROS).
  2. Revenue On-Line Service (ROS) provides you with the following methods of payment of tax:
    • ROS Debit Instruction (RDI),
    • Debit Card via ROS,
    • On-Line Banking via ROS (Income Tax and Capital Gains Tax only).

    Further information on Revenue On-Line Service payment options is available on our website.
  3. Postal Payments
    You can post a cheque payment to:
    Collector-General's Division,
    Sarsfield House,
    Francis Street,
    Limerick.

    Cheque payments, submitted with the appropriate payslip and delivered in time to be included with normal bank lodgements, will be credited to the taxpayer's account on the day of receipt.

Where there is no payment due, use the payslip provided to record ‘nil’ payments → Enter 0.

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Tax Returns

When must I make my Tax Return?

Under the Self-Assessment system, you have a legal duty to make a tax return for a year by 31 October in the following year. While tax returns are issued to certain persons on Revenue's records who are considered likely to have a tax liability under the Pay and File system, it is your responsibility to complete and submit a tax return on time each year. Your tax return must be sent to the Collector-General's Division by 31 October after the end of the tax year i.e. your tax return for a given tax year must be sent in by 31 October of the following tax year. The earlier you send in your tax return, the sooner you will know your final liability for the tax year - this is important when it comes to paying the balance of tax due for a previous year and calculating your Preliminary Tax for the current year.

Mandatory Requirement to file Tax Returns electronically

Mandatory electronic payments and filing, using Revenue On-Line Service (ROS), is part of Revenue's strategy to establish the use of electronic channels as the normal way of conducting tax business. From 1 June 2011, certain individuals are required to file their tax returns electronically. Please refer to the Revenue website for further information.

Making Tax Returns under Self-Assessment for the first time

Individuals, who enter the self-assessment system because they have commenced to trade, have until the return filing date for the second year to submit tax returns for both the first and second year of trading. However, as mentioned previously, early filing of returns is advisable, as it establishes tax liability due in advance of payment deadlines.

Early filing does not bring forward the payment date. It is your responsibility to calculate your own tax liabilities. However, if you file your tax return on or before 31 August, Revenue will calculate your tax liability for you based on your return for the year in question. This will assist you in paying the correct amount by the due date, 31 October. If you file your return after 31 August we cannot guarantee to provide you with a final assessment before 31 October and you may have to do your own calculations.

What happens after I have made my Tax Return?

Revenue will issue a Notice of Assessment for a tax year in accordance with your tax return for the year. This will show your total tax liability for the tax year. The Preliminary Tax paid by you for the year in question will be credited against your final liability for the year. Provided you had paid adequate Preliminary Tax, the due date for the payment of any additional tax is 31 October in the year following the year of assessment. If you have overpaid your tax it will, subject to relevant time limits, be refunded to you or offset against your other tax liabilities.

What happens if I do not submit my Tax Return on time?

Failure to submit your tax return by 31 October in the year following the tax year in question will result in a surcharge being added to your tax bill for the year. The surcharge is:

  • 5% of the tax up to a maximum of €12,695 where the return is made within 2 months of the return filing date,
  • 10% of the tax up to a maximum of €63,485 where the return is made more than 2 months after the return filing date.

What income do I include on my Tax Return?

Your tax assessment is normally based on your actual income arising in the tax year from 1 January to the following 31 December. However, if your income consists of profits from a business, trade, profession or vocation you may opt to prepare your accounts for an accounting period that ends within the tax year. Assessments in respect of any other income i.e. investment income, rental income, foreign pension or foreign salary are all based on the actual income arising in the tax year (i.e. from 1 January to the following 31 December).

What type of accounts will I have to submit with my Tax Return?

You are no longer required to submit self-employed business accounts with your return of income. You must still, however, prepare accounts and then provide relevant information for entry in the Extracts From Accounts pages of your tax return, pdfForm 11 (PDF, 1.19MB)or pdfForm 11E (PDF, 1MB), as applicable. These pages are essentially an extract from your accounts and not a tax adjustment computation. You do not have to complete the Extracts from Accounts if the source of income results from a partnership in which case the relevant information should be returned on pdfForm 1 (Firms) (PDF, 287KB), or if you have already submitted accounts to Revenue.

What accounts data do I submit if I am filing with ROS?

If you are filing your tax return electronically with the Revenue On-Line Service you must submit the same level and format of data as paper filers.

What do I do if I find I made an error in completing my Tax Return?

If you get an assessment in accordance with your tax return but you find you made an error in completing your return you should write immediately to your local Revenue office explaining what the error is and how it occurred. Revenue will amend your assessment as necessary to correct the situation.

What happens if I do not agree with my notice of assessment?

If the assessment is in accordance with your tax return and you have made a correct return then you have no grounds to appeal it. If the assessment is not in accordance with your tax return and you disagree with the assessment, you may appeal against it in writing to your local Revenue office, within 30 days after the date of the notice of assessment.

When making your appeal you must:

  • identify the specific matter with which you do not agree,
  • specify in detail the grounds of your appeal, and
  • pay, or have already paid, the amount of tax not in dispute.

If you and your local Revenue office fail to resolve the issue which you are appealing, you have the right to have your appeal heard by the Appeal Commissioners and, if necessary, by the courts.

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PRSI

Who pays PRSI?

With very few exceptions, the following individuals are liable for Pay-Related Social Insurance (PRSI) contributions:

  • Self-employed people with a minimum annual income who are aged 16 or over and under 66.
  • All employees whether full-time or part-time who are aged 16 and over and under 66.

What rate and amounts of PRSI do I have to pay?

Persons aged between 16 and 66 who are taxed under the self-assessment tax system are in general liable to pay PRSI at Class S. The Class S annual rates are listed in Leaflet IT1 - Tax Credits, Reliefs and Rates available at www.revenue.ie. For the tax year 2011, the rate of PRSI contribution payable by self-employed individuals whose annual income is at least €5,000 is 4% or €253, whichever is the greater. The minimum annual PRSI contribution for 2011 for such individuals is therefore €253.

Class S PRSI is not payable on income taxed under Self-Assessment by a person:

  • whose total income from all sources, before deduction of capital allowances and pension contributions is less than €5,000,
  • who is an employee (other than a proprietary director) or an occupational pensioner and whose self assessed income consists only of unearned income (for example deposit interest, rents, etc.),
  • who is a public servant paying Class B, C or D PRSI and who is also self-employed,
  • who is under 16 years or over 66 years of age,
  • who is in receipt of Pre-Retirement Allowance on an ongoing basis,
  • who is not resident or ordinarily resident in the State and whose self assessed income consists only of unearned income (for example deposit interest, rents, etc.).

Any sums received by way of pension, benefit, etc. from the Department of Social Protection, are exempt from PRSI.

You can obtain full details of all PRSI rates from the Department of Social Protection at the address and telephone number below.

More detailed information on PRSI for the Self-Employed is included in the Department of Social Protection guide on PRSI (see www.welfare.ieExternal link ) and is also available from:

Self–Employment Section,
Social Welfare Services Office,
Cork Road,
Waterford.
E-mail: selfemployment@welfare.ie
Telephone: Lo-Call Number 1890 690 690 (ROI only)

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Revenue Audit & Records

What is a Revenue Audit?

Under Self-Assessment, your tax return will normally be accepted by Revenue. However, your tax return may be selected for audit, in which case your records will be examined.

A Revenue audit is an examination of your tax return and records by a Revenue official to ensure that all profits, income and chargeable gains, where relevant, are correctly calculated and that none are omitted from the return. An audit may also be carried out to check that tax credits, reliefs, etc. claimed are due. Every year, a number of taxpayers are selected for audit. A taxpayer may be selected for varying reasons or on a random basis.

What advance notice will I be given?

Generally, twenty-one days advance notice in writing is given. The notification letter shows:

  • The date and time of the audit,
  • The year(s), accounting period(s) or tax period(s) which are to be audited,
  • The scope of the audit will also be set out and this can range from a single issue to a comprehensive audit for a number of years.

Where can I get further information on Revenue Audits?

Code of Practice for Revenue Audit is available from Revenue's website or from Revenue Forms and Leaflets Service at 1890 306 706 (ROI only) or +353 1 7023050 (outside ROI).

What records must I keep?

You must keep full and accurate records of your business from the start. You need to do this whether you send in a simple summary of your profit/loss, prepare the accounts yourself, or have an accountant prepare them. The records you keep must be sufficient to enable you to make a proper return of income for tax purposes and will depend on the nature and size of your trade, business or source of income.

The records kept must include books of account in which:

  • all purchases and sales of goods and services, and
  • all amounts received and all amounts paid out,

are recorded in a manner that will clearly show the amounts involved and the matters to which they relate.

All supporting records such as invoices, bank and building society statements, cheque stubs, receipts, rent books, etc. should also be retained.

How long must I keep Records?

You must keep your records for six years unless Revenue advises you otherwise.

What happens if I fail to keep proper Records?

Failure to keep proper records or failure to keep them for the necessary six years, where you are chargeable to tax, is a Revenue offence. If you are convicted of a Revenue offence you could face a heavy fine and/or imprisonment.

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Capital Gains Tax Self-Assessment

What is Capital Gains Tax?

Capital Gains Tax (CGT) is a tax which is payable on gains made on the disposal of certain assets. The more common chargeable assets are land, houses and shares, however other forms of property may also be chargeable assets. Please note that the term disposals refers not only to sales but also to gifts and donations. Where the disposal is made to a connected person the consideration for the disposal is deemed to be the market value of the asset at time of disposal.

How does Self-Assessment operate for Capital Gains Tax?

Self-Assessment for Capital Gains Tax operates in much the same way as for Income Tax, with the following variations:

  • Self-Assessment applies to all Taxpayers, including PAYE taxpayers, who make a chargeable gain in a tax year,
  • The payment date will depend on when the disposal was made during the year,
  • Capital Gains Tax should be paid in full by the due date. There is no Preliminary Tax element to Capital Gains Tax.

Capital Gains Tax 2010 and later years

Gains arising in the year 2010 should be included in your 2010 tax return.

For 2010 and subsequent years the tax year is divided into two periods for CGT payment purposes, as follows:

  • 'Initial period' - 1 January to 30 November, both inclusive.
  • 'Later period' - 1 December to 31 December, both inclusive.

The due dates for payment of CGT are as follows:

  • Disposals in the initial period: Tax due by 15 December in the same tax year.
  • Disposals in the later period: Tax due by 31 January in the following tax year.

Indexation relief on disposals will apply for the period of ownership of the asset up to 31 December 2002 only.

Generally speaking, a person will not dispose of capital assets on a frequent basis and, therefore, Capital Gains Tax will arise only occasionally. In order to avoid interest, penalties and surcharges, it is recommended that a person liable to CGT pays the correct tax and submits the appropriate return on time.

The Capital Gains Tax return, which can be either part of the Income Tax return or, where a tax return is not otherwise required, the dedicated CGT return pdfForm CG1 (PDF, 313KB), must be submitted by 31 October in the year following the year in which the gain was made.

Payment of CGT is made by sending the payment, along with the appropriate CGT Payslip for when the gain was made (pdfPayslip A (PDF, 103KB) for the initial period, pdfPayslip B (PDF, 44KB) for the later period) to:

Collector-General’s Division
Sarsfield House
Francis Street
Limerick

Blank CGT payslips are available from any Revenue District office.

If you need more information on Capital Gains Tax, you can get booklet pdfCGT1 - Guide to Capital Gains Tax (PDF, 1.33MB) from the Revenue website or by telephoning the Revenue Forms and Leaflets Service at:

  • Lo Call 1890 306 706 (Republic of Ireland (ROI) only) or
  • +353 1 7023050 (from outside ROI)

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Timetable of Important Dates in the Tax Year

January

  • Pay any Capital Gains Tax due on disposals made in the later period 1 December to 31 December in the previous tax year, by 31 January.

August

  • File your tax return for the previous tax year by 31 August, if you wish Revenue to calculate your final liability before the Pay & File due date of 31 October.

September

  • Pay & File Payment Reminder letters will begin to issue. These serve as a reminder that:
    • Payment of Preliminary Tax for the current year of assessment, must be paid by 31 October, and
    • Payment of the balance of Income Tax for the previous year, must be paid by 31 October.

October

  • Pay current year Preliminary Tax by 31 October,
  • File your tax return for the previous tax year by 31 October. Failure to send your completed tax return by this date will result in a surcharge (5% where the return is submitted within two months, otherwise 10%) being added to your final tax bill,
  • Pay the balance of tax for the previous year by 31 October,
  • File your Capital Gains Tax return for the previous tax year by 31 October.

December

  • Pay any Capital Gains Tax due on disposals made in the initial period 1 January to 30 November in the current tax year by 15 December (in the same tax year).

For a comprehensive listing, see Calendar - Key Revenue Dates on Revenue's website.

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Revenue Information Leaflets

Revenue has published a wide range of Guides and Information Leaflets. These are available from www.revenue.ie or the Revenue Forms and Leaflets Service Lo call 1890 306 706 (ROI only), + 353 1 7023050 (outside ROI).

The following information leaflets may be of interest to you

Income Tax

Capital Gains Tax

See also: pdfAgent's Guide to the Collector-General's Division (PDF, 987KB) which is available at www.revenue.ie.

Accessibility - If you are a person with a disability and require this leaflet in an alternative format the Revenue Access Officer can be contacted at accessofficer@revenue.ie

Please note that the rates charged for the use of the 1890 (LoCall) numbers may vary among different service providers. If calling from outside the Republic of Ireland phone +353 1 702 3011.

4-year time limit - A claim for tax relief must be made within four years after the end of the tax year to which the claim relates.


This leaflet is intended to describe the subject in general terms. As such, it does not attempt to cover every issue which may arise in relation to the subject. It does not purport to be a legal interpretation of the statutory provisions and consequently, responsibility cannot be accepted for any liability incurred or loss suffered as a result of relying on any matter published herein.

Revenue Commissioners

April 2014

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