Becoming self-employed or setting up as a sole trader in Ireland for the first time can be an exciting, challenging and anxious transition. Calculating and paying your tax liability in the first year adds to that stress. If you were a PAYE employee before, the simple pay-as-you-earn tax system handled your tax liability for you.
Now that you are self-employed, that tax responsibility rests with you. But it needn’t be a frightening prospect! To learn how to register as self-employed, register as a sole trader, and get set up for self-assessment and pay your taxes, please read on.
What is a Sole Trader?
Sole traders in Ireland are self-employed individuals who run their own businesses. They make up the vast majority of businesses in the country. Some examples of sole traders include hairdressers, freelancers, fitness instructors, electricians, plumbers, and consultants.
Any citizen of Ireland or another EEA (European Economic Area) country can register as a sole trader in Ireland. There are many benefits to setting up as a sole trader, such as ease of setup, low startup costs, and tax credits. Registering as a sole trader in Ireland is a simple and straightforward process.
Registering as a Sole Trader/ Self-Employed
If you have recently established a business, started working as a sole trader or became a landlord, congratulations. You are now self-employed! The main legal responsibility for any self-employed person in Ireland is registering as a sole trader with Revenue. You are obliged to do this once you begin doing business through self-employment.
Tax Return Plus can register you as a sole trader for income tax or alternatively you can use ROS or by completing and submitting a Form TR1. If you are commencing a trade you might consider registering a business name with the Companies Registration Office.
Most self-employed people must register for Value Added Tax, with some exceptions. You must register for VAT, effective 01st January 2024 if your annual expected turnover exceeds:
• €80,000 in the supply of goods, previously €75,000
The Self-Assessment Tax System
Self-employed people or sole traders must complete an annual self-assessment called Form 11 to calculate and pay tax, and file an annual tax return. If you receive income from sources where some of the tax is not collected through PAYE, self-assessment is also required.
• Investment incomes
• Foreign income or pensions
• Maintenance payments made to separated persons or from dissolved civil partnerships
• Fees and other income not subject to PAYE
• Profits earned by exercising share options or incentives
Self-employed people should maintain records of all purchases and sales of goods and services. This includes all amounts received and all amounts paid out. Recently self-employed people must submit their tax return by the second year of self-employment, by October 31st.
How to Register for Self-Assessment as a Sole Trader
PRSI sign-up is automatic when you register for self-assessment tax as a self-employed person. Most sole traders and self-employed people will pay Class S PRSI contributions. This entitles you to a limited range of social insurance payments, including:
• Widower’s or surviving civil partner’s contributory pension
• Guardian’s payment (contributory)
• State pension (contributory)
• Maternity benefit
• Adoptive benefit
There are additional tax benefits available to self-employed people, such as the Earned Income Tax Credit worth €1,775. There are also additional requirements for people who must complete self-assessment. These include guidelines for keeping documentation and noting important deadlines.
It’s worth doing your homework to ensure you have registered your information correctly. It is necessary to keep your documentation in order. You must also be aware of the rules and requirements of self-employment tax liability and self-assessment tax returns.
Recently self-employed and need advice?
Tax Return Plus can take care of filing your tax returns, providing expert help and assistance throughout the process. We have over 25 years of experience in self-employment tax, and helping individuals register as a sole trader. Our service is affordable, private and confidential. This gives you the peace of mind to focus on what really matters to you in your business. Fill out our simple form to get a quote or contact one of our tax return experts today.