All other things being equal, you’re going to pay less tax in your 2023 Form 11 tax return this year – and less again for your preliminary tax for 2024 – thanks to recent tax cuts. That’s the good news. Yes, it’s that time of year again when the self-employed, landlords and their accountants scramble around to find and file all relevant receipts etc to reduce their tax burden.
It all could have been done many months ago, of course, but most of us leave it to the last minute.
“It’s much better in February to find out what you owe and make a plan,” says Alan Purcell, of accountancy and tax advisory business CloudAccounts, though he adds that people are often reluctant to do this. “It happens every year that people don’t think about it, or plan for payment of it ... I get emails every year on the 30th and 31st of October,” he adds.
This year’s return, says Brendan Allen, a Carlow-based tax adviser, is “more of the same”. However, he does question the number of questions people are asked to respond to. “Form 11 now has become a monster – there are over 900 questions over 74 pages,” he says.
In short, however, it is just something that has to be done, and the bill paid. As Allen says, “Be compliant: it’s a lot cheaper”.
Deadline
This year, people filing online will have until Thursday, November 14th, to file their return and make their payment. Those filing by paper must do so by October 31st – or risk getting a fright thereafter.
Bear in mind you also need to pay your preliminary tax for 2024. This can be calculated either as 90 per cent of tax owed for current year; 100 per cent of the previous year; or 105 per cent for the year before that.
Purcell says that preliminary tax is something that often catches people out.
“Someone might pay their preliminary tax based on previous year’s taxes, but now it’s €5,000 where once it was €500, so that’s a difference of €4,500″. He typically suggests going with the option of 100 per cent of this year “unless your income has changed a lot”.
Who must file?
If you’re a PAYE worker, but you earned more than €5,000 last year from non-PAYE sources (or €30,000 gross), then you too must file a Form 11. Otherwise, it can be a Form 12 which is also used by PAYE workers who need to file a return to claim things such as health expenses or the rent tax credit.
If you’re a proprietary director, you must fill out a Form 11 regardless of your income.
A “really positive change” this year, says Purcell, is that where, previously, you had to click a button to claim credits such as the personal tax/earned income credits, Revenue has now put them in as default for those eligible.
“This means that there is much less chance of people not claiming that credit,” says Purcell.
Filers have also been asked to tick a box to indicate whether their trading income is inclusive or exclusive of VAT. As Purcell notes, this is in line with increasing Revenue intervention on people who are over the VAT threshold but haven’t registered for VAT. Making people tick the box should remind people that it is something they may need to consider.
Remember that this year’s budget increased the ceiling for VAT registration for services to €42,500 from January 1st, 2025 but that obviously does not apply to your 2023 return.
“If you get your VAT wrong, it will destroy your business, so the more people we can keep outside the VAT net the better,” says Allen.
Income tax
Those filing tax returns for 2023 will need to cast their minds back to October 2022, when Budget 2023 was announced for the relevant thresholds. And the good news is that the tax burden fell at that time.
The standard rate band rose by €3,200 to €40,000 (€49,000 for married couples), which means that those filing this year will get to pay the lower 20 per cent rate of tax on a greater portion of their incomes.
Similarly, the ceiling for the 2 per cent USC band increased by €1,625 to €22,920.
A number of tax credits, including the earned income tax credit – which applies to those who can’t claim the PAYE credit – rose. The earned income tax credit was €75 higher at €1,775. The Home Carer tax credit rose by €100 to €1,700.
Self-employed people who are renting can also claim the rent credit, at a rate of €500 a year (note for preliminary tax purposes, this increased to €1,000 in 2024 thanks to the 2025 budget).
If you’re earning interest offshore, remember this needs to be declared; Purcell has seen “a few interventions” from Revenue when it comes to people who hold foreign-based accounts, such as De Giro or Trading 212 accounts.
Landlords
As you might recall, last year’s budget introduced a new relief for landlords that will apply between 2024 and 2027. Of course, landlords are currently filing returns for the 2023 tax year and so can’t benefit from this relief in this year’s return. However, as Allen notes, it can be used to lower preliminary tax for the current year, 2024, which is also due with this year’s return.
But what is the new Residential Premises Rental Income Relief?
Well, first of all, there is a caveat: to benefit from the relief, your property must continue to rented out for four years after initial claim. So, if you claim the relief for 2024, for example, but sell the property in 2025, it will be clawed back. Similarly, if the use of the property changes – to a holiday let for example – it may also be clawed back.
You must also be compliant with the local property tax, and either be registered with the Residential Tenancies Board or rented to a local authority. Also, you cannot claim the relief if you are renting to a connected person, such as a family member or relative – even if they pay rent.
The relief will be available against rental income of €3,000 at the standard rate of 20 per cent in 2024. This means then, that a landlord will pay €600 less tax for 2024. The relief will increase to €4,000 for 2025 (€800), and €5,000 for 2026 and 2027 (€1,000) in order to incentivise landlords to stay in the market. In total, over the four years, a landlord could expect to pay €3,400 less in tax as a result of this measure.
The relief can only be applied once so even if you own multiple properties, you can’t use it multiple times.
Overall, Allen says the relief is “disappointing”, arguing that it’s “a bit unbalanced”. “If you’re a renter, the rental credit (just increased to €1,000) is higher than what the landlord will get,” he says, arguing that it simply isn’t enough.
“Six-hundred euro of a tax credit won’t change anyone’s mind to stay in the market or get into the market,” he says, adding: “There are a number of people joining [the rental market as landlords], but there are more leaving”.
To further incentivise smaller landlords, he suggests rental income should be treated the same as other business income, which would mean landlords could offset more expenses against their tax bill, and claim other reliefs such as entrepreneurial or retirement relief.
Allen welcomes the extension to 2027 of permitting pre-letting expenses of some €10,000 to be tax deductible.
“It’s a very useful relief,” he says, adding that when people inherit a house, it is often not in great repair Having that facility is “really very useful” to get properties on the rental market.
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