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The Self Assessment Tax System

Income Tax  

Corporation Tax

Income Tax

Income tax is payable on the annual profits or gains of individuals (not companies) from business and other taxable income, for each tax year.  The tax year now runs on a calendar year basis – i.e. it begins on 1 January and ends on 31 December each year

You will normally be taxed on the profits of your accounting year e.g. the year in which your annual accounts are made up to a date in that tax year. For example if your accounts are for the year ended 31 August 2009, they will form the basis for your tax liability for the tax year 2009.

There are special rules covering the commencement of a new business, and for businesses ceasing to trade. Please contact us for further details.

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Self Assessment

All self-employed people are taxed under the Self Assessment system.

Under this system you must:  

There is no compulsion on a new business to pay Preliminary Tax in its first year in business.

However, business-owners should make provision for their income tax liability for that year, in order to avoid cashflow problems later on, when the tax becomes due for that year.

We can arrange with the Collector-General for you to pay your Preliminary Tax by direct debit in equal monthly instalments.

After the Revenue receive your tax return, they will issue a Notice of Assessment to you which confirms your tax position for the year. If you have overpaid tax for the year, it will normally be refunded to you after this Assessment is issued.

If you fail to submit your tax return by the due date, you will face a surcharge on your final tax bill for the year. The surcharge is:

No surcharge is applicable to new businesses, if the Year 1 return is made by the return filing date for Year 2.

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Corporation Tax

Companies pay Corporation Tax, which is taxed on company profits, including both income and chargeable gains.

A company’s taxable income is calculated under the same rules as those applying to individuals under the Income Tax code. Chargeable gains are calculated in accordance with Capital Gains Tax rules.

Company Losses

Company losses can only be set off against other company income, or against future or past profits (subject to conditions).

If you are trading through a company, you cannot offset any loss against any your personal income.

Self Assessment for Companies

The self assessment system applies to companies, in much the same way as it does to individuals, but with certain important differences..

Preliminary Tax

Companies must calculate and pay their annual Corporation tax bill, one month before the end of their accounting year (the period for which the company makes up its accounts)

Interest is charged on late or insufficient payments of Preliminary Tax.

Corporation Tax Returns

A company must prepare and submit a tax return (Form CT1) within nine months of their year-end.

If the company fails to submit a tax return on time, a surcharge will be imposed. The surcharge is the same as for income tax. Late submission of the From CT1 may affect the company’s ability to claim certain reliefs and allowances.

Taxation of directors and shareholders

If you set up a company, the company will be obliged to register for and operate PAYE/PRSI on your salary as a director. Directors will be taxed according to the Income Tax code, on a similar basis to the self-employed.

Shareholders will have to pay income tax on any dividends received from the company. Shareholders can avail of certain tax credits which they can offset against this tax.

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Starting a New Business? Take a look at our Guide for New Businesses