When you become self-employed it means you are carrying on your own business rather than working for an employer and there are a number of things to take into consideration.
Setting up as Sole Trader - A few things you need to do!
You may carry on your business using your own name. If you wish to use a business name you must register your business name with the Companies Registration Office using Form RBN1. You will then be issued with a Certificate of Business Name.
You may need to have a business account with your bank. This allows you to keep your business income separate from your personal income. In general, you will need your Certificate of Business Name to open a business bank account.
To set up as a sole trader you must register for income tax with Revenue as a self-employed sole trader. You do this using Revenue’s online service using the tax registration form TR1 on revenue.ie. This form can be also be used to register for VAT. You will receive a “Notice of Registration” confirming that you are registered for income tax and, if applicable, for VAT.
As a self-employed individual you pay tax under the self-assessment system. You pay Preliminary Tax (an estimate of tax due) on or before 31 October each year and make a tax return not later than 31 October following the end of the tax year. You must keep proper records to allow you to fill out your annual tax return. You pay the Universal Social Charge directly to Revenue when you make your annual tax return.
Earned Income tax credit: Starting in 2016, as a self-employed trader you may claim a new Earned Income tax credit of €550. However, if you also qualify for the PAYE tax credit, the combined value of these 2 tax credits cannot exceed €1,650.
You must register for Value Added Tax (VAT) if your annual turnover exceeds or is likely to exceed the following annual limits: €75,000 in respect of the supply of goods or €37,500 in respect of the supply of services.
4. PRSI
If you are self-employed you pay Class S PRSI contributions. This entitles you to a limited range of social insurance payments. Class S PRSI contributions are paid at a rate of 4% on all income or €500 whichever is the greater. If you earn less than €5,000 from self-employment in a year you are exempt from paying Class S PRSI but you may pay €500 as a voluntary contributor.
You must keep accounts which record
Most successful business enterprises in Ireland are small businesses, being a sole trader allows you to control what you do, organise your own hours as well as influence greatly your income potential.
For more information and assistance on becoming self-employed contact George Skelton or Kevin O’Donnell on 053 9170507.