In Ireland you can be both employed and self-employed at the same time. To do this you simply register on ROS for income tax. There are a number of benefits of being both employed and self-employed. The biggest being you can offset your self-employed expenses against your PAYE income. One of the biggest drawbacks is you need to keep proper records and submit an annual return. Depending on your trade and your income you may need to also register for VAT. You can do this yourself or hire an accountant. The fees for an accountant to complete a self-assessment return can range from €250 – €750 + VAT for a sole trader.
It’s also important to be aware there are a lot of things you can expense when you are self-employed like the rent you pay on your home if you’re working from home. There are other things you can’t expense like client entertainment.
Generally, if you are working part-time self-employed you won’t be earning enough to take advantage of the benefits of a company but in some circumstances it makes more sense to setup a company than to be self-employed in Ireland.
Keeping Proper Records
You have a legal obligation to maintain a set of proper records should Revenue decide to audit you in the future. These records should be able to substantiate the figures included in your annual income tax return. You should keep copies of anything that was included in your income tax return. These include:
- Receipts for expenses
- Receipts for purchases of equipment or assets
- Sales invoices
- Bank account statements
- Method for apportion mixed expenses ie when you have expenses which were both private and personal, how did you apportion the business expenses.
Being Self-Employed in Ireland
The Advantages of being Self-Employed in Ireland
One of the biggest advantages of being self-employed is the flexibility it offers in terms of what you can expense. If you are working from home you can expense a portion of your rent, internet, electricity and heating costs. If you buy office furniture or new equipment you get a capital allowance of 12.5% each year over 8 years which will reduce the amount of tax you need to pay. You can also expense any training courses or the purchase of educational material. If you are registered for VAT you can also claim the VAT back. You are allowed to use your business equipment for personal use as long as this use is kept to a minimum. For more information please see our article on allowable expenses for the self-employed in Ireland.
The Disadvantages of being Self-Employed in Ireland
The biggest disadvantages of being self employed is your obligation to keep proper records and your filing obligations. You can hire an accountant to complete these for you. The expected fee for an annual return is €250 – €750 + VAT. This can vary depending on a number of factors including: the quality of your records, the number of transactions, if you have employees, if you are registered for VAT and the complexity of your business. Please see our article on reducing your accountant’s fees. Your ideal accountant is someone working from home who you can communicate with remotely. Accountants with staff and an office will have to charge you a higher fee to cover their higher cost base.
Allowable expenses for the Self-Employed in Ireland
As mentioned already in the advantages of being self-employed in Ireland you have a lot more flexibility in what you can expenses in comparison to someone who works as an employee. We have already written a detailed article on allowable expenses for the self-employed if you need more detailed information. You can also read the specific guidance issued by revenue.
As a self-employed person in Ireland you can claim the following general expenses:
- Advertising & Marketing
- Professional fees
- Travel – Transports, food & accommodation
- Training & Education
- Interest and other bank fees
- Purchase of assets – through capital allowances
Disallowable expenses for the Self-Employed in Ireland
It is important to note you can not expense certain items when calculating your tax liability. These include:
- Clothing – Unless protective
- Food or Travel – Unless you are away from your normal place of work
- Client Entertainment
- Staff Entertainment – Must be reasonable
- Your Salary
- Structural alterations to your home
Self-Employed Home office
If you are setting up a home office you can expense a portion of your rent, internet, electricity and heating expenses. It is not recommended you try to expense your mortgage as this will be taxed as income. As mentioned previously you get a capital allowance for any equipment you purchase for your home office. You receive a capital allowance of 12.5% over an 8 year period against the cost of these assets. You are allowed to use the assets as long as this use is kept to a minimum and there are no additional charges to the business as a result of you using those assets.
It is advisable that you use a separate phone for your business as it can be difficult to keep track of costs for business calls. If you do have a separate phone for your business you are allowed to use it as long as that use is kept to a minimum and there are no additional charges to your business as a result of your personal use.
Self-Employed Pre-trading expenses
If you have any pre-trading expenses you can claim these expenses. These expenses must have been incurred in the 3 year immediately to the trade commencing and must ordinarily be an allowable expense if they had been incurred after the trade commenced. Additional information available from Revenue.
Self-Employed Motor Expenses
If you are using your car for business use you can expense a portion of the running costs to your business. These costs can included:
It is not advisable you use a company car for personal use as the cost of the benefit in kind is very high. If you would like more information on the topic please see this guidance.
Questions on being Self-Employed in Ireland
Should I setup a company in Ireland instead of being Self-Employed?
Generally if you are only self-employed part-time in Ireland you probably will not be earning enough to justify setting up a limited company in Ireland. One of the major benefits of a company is its tax efficiency for reinvesting profits. As a self-employed person your profits are taxed at 20-40%. Whereas with a company profits are taxed at 12.5%. If you are able to survive on your PAYE income and you expect to make significant profits you’d like to reinvest into your business then it makes financial sense to change from a sole trader (self-employed) to a limited company. If your profits are at a certain level there are a number of advantages to having a limited company.
Do I need a separate business bank account in Ireland?
Legally you do not need to have a separate bank account. However, there is the added benefit of making your accountant’s life easier which does result in lower fees. There’s also the privacy issue as well to consider. You will need to provide your accountant with your personal bank accountant statements. Also, if you are using your own personal credit card to purchase items for your business these will also need to be shared with your accountant as proof of payment.
We have more information on business bank accounts for startups in Ireland if you need more information.
Do I need to Register a Business Name in Ireland if I’m Self-Employed?
You will need to register a business name with the CRO if you are trading under a different name to your own. You can do this through core.ie. The process is very straightforward and the cost is €20. There is more information on registering a business name in Ireland here. You need to make sure the name you select is not already registered. The onus is on you to check this not the CRO.
When do I need to register for VAT in Ireland if I’m Self-Employed?
If you haven’t made any sales then you do not need to register for VAT. Only when your turnover exceeds certain thresholds are you expected to register for VAT. The thresholds are:
- €37,500 for supply of services only
- €41,000 for making acquisitions from other European member states
- €75,000 when supplying goods