Preliminary Tax for Irish Contractors: Why the October Bill Is Really Two Bills

Preliminary tax is the part of Irish self-assessment that catches contractors in their second year, not their first. In year one, the rule is generous. You can base preliminary tax on 100% of the previous year’s bill, and for a brand-new sole trader that bill was nil. So nothing is due. Then the following October arrives. Revenue wants the whole of year one settled and a full year-two payment on account, on the same day, out of the same bank account.

That is the operator consequence in one line. The first proper Pay and File deadline is really two bills, and the second one is roughly the size of the first. Take a Galway electrician who cleared €60,000 in 2025 and spent it like it was his own. He will owe something close to €22,000 in income tax, USC and PRSI for 2025, plus another sum of the same order as preliminary tax for 2026. Both fall due on 31 October 2026, or 18 November if he files and pays through ROS. Nobody sends a warning letter in June.

What preliminary tax actually is

Ireland runs Pay and File. On one date each year, a chargeable person files the Form 11 for the previous year and pays whatever balance is still owed for that year. On the same date, they pay preliminary tax for the current year. The current-year payment is an advance, because the self-employed do not pay through payroll the way PAYE workers do.

Revenue accepts three ways of setting the figure, and you must hit one of them to avoid interest. Pay at least 90% of what the current year will finally cost, which requires a real forecast. Pay 100% of last year’s final liability, which is a known number and is the option most contractors take. Or pay 105% of the liability from two years back, but only if you pay by monthly direct debit through ROS. Get under all three and interest runs at 0.0219% a day on the shortfall, which is roughly 8% a year.

Miss the filing date and a surcharge is added on top. Within two months late it is 5% of the year’s tax, capped at €12,695. After two months it is 10%, capped at €63,485. The surcharge is calculated before credit for any preliminary tax you already paid. So a late return still costs you, even when the money went in on time.

The Galway year-two moment

Picture the electrician in his second full year. He started trading in March 2025 and registered for income tax through ROS. Then he did the right thing and filed a Form 11 for 2025 in October 2026. His accountant works out the 2025 liability. It is income tax after the €2,000 personal and €2,000 earned income credits, USC across the bands, and Class S PRSI at 4.2%. Call it €22,000.

Because 2024 was a nil year, no preliminary tax was ever paid for 2025. Every euro of that €22,000 is now due. Then, using the 100% rule, preliminary tax for 2026 is another €22,000. His van is financed, the mortgage went up, and his materials supplier moved him to 30-day terms in the spring. He has about €9,000 in the business account. The gap is not a tax problem. It is a cash-flow problem that a tax rule made visible fourteen months late.

The preliminary tax calendar, step by step

Step	When	What it prevents
Register for income tax through ROS as soon as trading starts	Before the first invoice, or within the first weeks of trading	Being treated as unregistered when a principal checks you for RCT, and losing the early-filing option
Open a separate account and move a fixed share of every paid invoice into it	From the first payment received	The year-two double bill landing on an empty account
Run a rough liability estimate at the half-year	June or July each year	Discovering in October that 100% of last year is far short of 90% of this year
File the Form 11 before 31 August	Late summer, when the books for the previous year are closed	Working out the self-assessment yourself; Revenue calculates it for early filers and tells you the number
Pay the balance and preliminary tax through ROS	31 October, or 18 November 2026 for the 2025 return if both filing and payment go through ROS	The surcharge, the daily interest, and a fall back to the paper deadline if only one of the two is done online
Set up a ROS direct debit for next year’s preliminary tax	Immediately after filing	A single November payment; the 105% rule also becomes available

Do this differently: treat the set-aside as a supplier

Most contractors save for tax the way they save for a holiday, which is to say when there is something left. Our read is that this is the single habit that separates the two kinds of operator. One sails through year two; the other ends up on a Revenue phased payment arrangement. The fix is mechanical. When an invoice is paid, a fixed percentage leaves the trading account the same day, as if Revenue were a supplier on seven-day terms. For most sole traders in the trades, somewhere between 25% and 30% of net profit is the right figure. Your accountant will then tighten it after the first Form 11.

The percentage only works if you know your profit as you go, not fourteen months later. When quotes, jobs and invoices sit in one system, the running total is visible every week: what has been invoiced, what has been paid and what is still out. SendWork keeps that job-and-invoice history in one place. So the number you set aside is based on money that has actually landed, rather than on a hopeful guess in October.

Preliminary tax for contractors: the checklist

• Confirm you are a chargeable person. Any self-employed trade income makes you one, as does owning more than 15% of a company. Non-PAYE income above €5,000 net triggers it too.
• Use the 100% rule only when last year was a full year. If it was a part year or nil, 100% of it is not a plan. Estimate 90% of the current year instead.
• Remember PRSI changes mid-year. Class S runs at 4.2% until 30 September 2026 and 4.35% from 1 October, so 2026 income carries a blended rate.
• Check the USC surcharge. Self-employed income above €100,000 attracts an extra 3%, giving an 11% band that PAYE workers never see.
• File and pay through ROS. Only the combination earns the extended date. A ROS return with a cheque falls back to 31 October.
• Diarise Budget day. Budget 2027 lands in October 2026 and can move bands, credits and USC for the year ahead.

Preliminary tax: the operator takeaway

The system is not designed to trip anyone. It is designed to bring the self-employed into line with PAYE workers, who pay as they earn. The trap is entirely one of timing: a year of untaxed income followed by two years’ worth of tax in one payment. Operators who understand that in March of year one rarely feel it in October of year two.

The deadlines, the three calculation options and the surcharge rules are set out on the Revenue Commissioners’ guide to self-assessment. Confirm the ROS extension date each year, because Revenue publishes it separately. If you are still deciding whether to trade as a sole trader at all, read the sole trader vs limited company question first. It changes which of these rules apply to you.

What can wait is the fine-tuning between the 90% and 100% methods. What cannot wait is the separate account, opened this week, with the first transfer already made.

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