Preliminary Tax is an estimate of the amount of Income Tax you owe for the current tax year. Many people don’t realise why they have to pay preliminary tax so we'll try and explain as follows:
As a self-employed tax payer, the deadline for paying your income tax for 2015 is the 31st October 2016. This means that 10 months into 2016 a self-employed person has yet to pay any income tax. Compare this to the PAYE worker who pays their taxes every month and it appears to give a cash flow advantage to the self-employed. To recover some income tax on the 10 months of income, Revenue require self-employed persons to make a preliminary tax payment when they file their 2015 tax return. However, since the self-employed don’t know what their final profit for 2016 will be, revenue gives them a choice.