Provisional tax helps you manage your income tax. You pay it in instalments during the year instead of paying a lump sum amount at the end of the year.
If you had more than $2,500 tax to pay at the end of the year from your last income tax return, you'll have to pay provisional tax the following year. This usually happens when you earn income without having tax deducted during the year.
Anyone who pays income tax may need to pay provisional tax including individuals, companies and trusts. Provisional taxpayers often earn:
Tax to pay at the end of the year is called residual income tax (RIT). Residual income tax is the amount of income tax you pay for the year, less any PAYE and other tax credits you may be entitled to, except for Working for Families Tax Credits.
To help you meet your provisional tax obligations.
Calculate your provisional tax
Know your payment dates
Pay provisional tax on fixed dates during the year. Your payment dates will depend on:
. Make sure you pay on time to avoid late payment penalties or interest.
Budget for provisional tax