Your first year of self-employment goes well, the invoices get paid, and then the tax bill lands. Not one bill, though. Two. You owe the balance of Income Tax for the year that has just been assessed, and on the very same day you owe preliminary tax for the year you are currently trading through. That combination catches out a lot of sole traders in Limerick and beyond, and it is the single biggest cash-flow shock of going out on your own.
The good news is that the rules are fixed, published and fairly generous. Below: what preliminary tax actually is, the three calculation methods you can choose between, worked figures at three profit levels, the 2026 deadline, the step-by-step ROS process, and what happens if you get the number wrong.
What is preliminary tax and who has to pay it?
Revenue defines preliminary tax as "your estimate of the Income Tax, Pay Related Social Insurance (PRSI) and Universal Social Charge (USC) that you expect to pay for a tax year", payable during that same year (Revenue, What is preliminary tax?). Think of it as paying for the year you are living in, rather than the year you have finished.
It applies if you are a chargeable person under self-assessment. In practice that means:
- Sole traders and self-employed people trading in their own name
- Partners in a partnership
- Company directors with a material interest, and people with significant rental, investment or foreign income outside the PAYE system
- Freelancers and contractors who invoice rather than draw a payslip
Yes, the payment covers all three charges: Income Tax, USC and PRSI, calculated after your allowable expenses, reliefs and tax credits, and after any tax already deducted at source. One payment, three liabilities inside it.
It sits alongside, not instead of, the balance owing for the previous year. Under Revenue's pay and file system, both fall due on the same date, which is why the first bill feels so heavy.
How do I calculate preliminary tax using the 90, 100 and 105 per cent rules?
A common misreading: people think they pay 90 per cent of their profits. You do not. You pay an amount that satisfies at least one of three permitted tests, and you can pick whichever suits you.
| Rule | What you pay | Conditions |
|---|---|---|
| 90 per cent | At least 90% of your final Income Tax, USC and PRSI liability for the current year | Needs an accurate estimate of a year that is not finished yet |
| 100 per cent | 100% of your final liability for the immediately previous year | No estimating required, the figure is already known |
| 105 per cent | 105% of your liability for the year before that (the pre-preceding year) | Only where you pay by monthly direct debit, and not available if that year's liability was nil |
To get to any of these figures you start with expected taxable profit, not turnover. Deduct allowable business expenses and capital allowances, apply your rate bands, then add USC and PRSI, then subtract your tax credits and anything already paid through PAYE or withheld at source. What is left is your estimated liability for the year. Good bookkeeping through the year is what makes that estimate believable rather than a guess.
What would preliminary tax look like at three different profit levels?
Assumptions for the table below: tax year 2026, a single self-employed person with no other income and no dependants, claiming the personal tax credit and earned income credit (€2,000 each) against a €44,000 standard rate band (Revenue tax relief charts), 2026 USC rates of 0.5%, 2%, 3% and 8%, and a Class S PRSI rate of 4.2375% for self-assessed 2026 income (Department of Social Protection). The 2025 and 2024 liabilities are illustrative figures invented to show how the rules compare.
| Expected 2026 profit | Estimated 2026 liability (IT + USC + PRSI) | 90% rule | Illustrative 2025 liability, 100% rule | Illustrative 2024 liability, 105% rule |
|---|---|---|---|---|
| €30,000 | €3,704 | €3,334 | €2,900, pay €2,900 | €2,400, pay €2,520 |
| €60,000 | €15,075 | €13,568 | €14,200, pay €14,200 | €12,800, pay €13,440 |
| €100,000 | €35,468 | €31,922 | €30,100, pay €30,100 | €33,500, pay €35,175 |
Notice how the winner changes. At €30,000 and €60,000 the 105 per cent option is cheapest; at €100,000 the previous-year rule wins because that year was quieter. The lowest number is not automatically the smartest one, mind. Whatever you underpay now, you still owe next October on top of that year's preliminary tax. Paying the higher figure flattens the following year's bill.
Replace these figures with your own. Rates, credits, pension contributions and personal circumstances all move the answer.
When is preliminary tax due in Ireland?
Preliminary tax for self-employed individuals is due by 31 October of the tax year in question. Three things happen together on that date, per Revenue's pay and file guidance:
| Obligation | For the 2026 deadline |
|---|---|
| File your self-assessment return (Form 11) | 2025 return |
| Pay any balance of tax due | 2025 balance |
| Pay preliminary tax | 2026 preliminary tax |
If you both file and pay through ROS, Revenue extends the date to 18 November 2026. The extension is conditional: miss either half of it, file on ROS but pay by other means, and you lose the extra time. Revenue confirms the qualifying date each year, so check it rather than assuming.
The payment is not lost money. When you file your 2026 Form 11 in late 2027, the preliminary tax you paid in 2026 is credited against your final 2026 liability, and you pay or reclaim the difference.
How do I declare and pay preliminary tax through ROS?
Filing and paying are two separate actions in ROS. Do both.
- Sign in to ROS and open the Income Tax Form 11 for the previous year.
- Complete the return, then work through the self-assessment panel.
- Enter your preliminary tax figure for the current year and submit the return.
- Go to the payments area and choose to make a payment.
- Select Income Tax as the tax type and the correct period, which is the current year for preliminary tax.
- Enter the amount, choose your payment method, review the summary, and submit.
ROS offers a ROS Debit Instruction, which pulls the amount from a nominated bank account, or an eligible debit or credit card, which is subject to your bank's daily limits. You can also spread the cost across the year using Revenue's monthly direct debit facility for preliminary Income Tax, collected on the ninth of each month. Check availability and limits in ROS before the deadline, not on the day.
Two habits worth forming. Save the ROS acknowledgement and the payment confirmation as PDFs, because they are your evidence of filing and paying. And double-check the tax type and period on screen: mis-selecting the year sends your money to the previous year's balance and leaves the preliminary payment short.
What happens if I underpay or miss the preliminary tax deadline?
If your payment fails to satisfy any of the three rules, Revenue can charge interest from the original due date at a daily rate of 0.0219% (Revenue guidelines on charging interest on late payment). Interest runs for each day, or part of a day, that the money is late.
- Safe harbour holds. If you used the 100 per cent previous-year rule correctly and your actual year turned out far better than expected, that is not an underpayment. You have met a permitted test.
- Interest and surcharge are different things. Interest applies to late or insufficient payment. A separate surcharge applies to a late Form 11: 5% of the tax due (capped at €12,695) if filed within two months, 10% (capped at €63,485) after that.
- Fix a shortfall quickly. Make a top-up payment through ROS rather than waiting for the final assessment, because interest keeps running.
- Talk before the deadline if you cannot pay. Revenue engages with taxpayers who make contact. It engages far less warmly with silence.
Frequently asked questions
Do I have to pay preliminary tax in my first year of self-employment?
Often, in effect, no. Your previous year's liability is usually nil if you were not chargeable then, so paying nothing satisfies the 100 per cent rule. The catch is cash flow. Pay nothing now and next October you face a full year's balance plus a full year's preliminary tax in one go. Many new sole traders put money aside monthly and make a voluntary payment anyway.
Which preliminary tax calculation method is safest if my income changes?
The 100 per cent rule is the certain one, because the figure is already agreed and cannot be wrong. The 90 per cent rule can cost you less when income is falling, but it relies on your own estimate of an unfinished year, and a bad estimate means interest. The 105 per cent option is only on the table if you are paying by direct debit and the pre-preceding year was not nil. Rising income favours the previous-year rule; falling income favours the 90 per cent rule.
Can I pay preliminary tax in instalments?
Yes, through Revenue's monthly direct debit arrangement for preliminary Income Tax, set up in ROS. You can also make voluntary part-payments through the year to reduce the October hit. Either way, the required total must be paid by the deadline unless Revenue has formally agreed a phased payment arrangement with you.
What should I do before making my first preliminary tax payment?
- Estimate taxable profit for the current year, after expenses and capital allowances
- Work out Income Tax, USC and PRSI on that figure, then deduct your credits
- Compare all three rules and pick deliberately, not by default
- Confirm this year's ROS date and diary it two weeks early
- File the Form 11, pay, and save both confirmations
If your income swings, you have several income sources, or the number in front of you is one you cannot pay, get advice before the deadline rather than after it. Our team offers tax advice to self-employed clients across Limerick and Munster, and you are welcome to get in touch well ahead of 31 October.
The information in this blog is provided for general informational purposes only and does not constitute accounting, tax, business, or legal advice. While Coffey & Co aims to ensure the content is accurate and up to date, no guarantee is given regarding its completeness or suitability for any particular purpose.