Sole trader Ireland : Guide to starting as a sole trader

Introduction

Being a sole trader is a popular option for a lot of entrepreneurs because it is a very easy structure to set up.  A sole trader and being self-employed are essentially the same thing. 

You are not required to produce a set of accounts although you are required to complete a self-assessment each year. 

A sole trader gives you the option to test your business idea without being overburdened with returns or high accounting fees. If your business idea is successful and starts generating revenue you can switch to a limited company at any time.

This article will cover:

  • Should I be a sole trader in Ireland?
  • When should I set up a limited company in Ireland?
  • How do I register as a sole trader in Ireland?
  • What are my filing obligations as a sole trader?
  • What taxes do I pay as a sole trader in Ireland?
  • Can I be an employee and a sole trader?
Sole Trader Ireland

Should I be a sole trader in Ireland?

Firstly, be careful when getting advice on your business structure. Some accountants will tell you to set up a limited company when it isn’t necessary. In some cases it is because accounting fees are higher for a limited than a sole trader. 

You should be a sole trader in the following circumstances:

  1. You are just starting a business and you’re testing your idea
  2. You are making a very low profit
  3. None of the profits will be reinvested in the business 
  4. There is a very low risk of the business defaulting on its debts

We’ve written an article on a limited company vs a sole trader.

When should I set up a limited company in Ireland?

You should set up your business structure as a limited company in the following circumstances:

  1. You are reinvesting profits back into the business
  2. There is a high risk the business will default on its debts
  3. You require multiple founders
  4. You will be seeking funding
  5. You are taking a significant salary from the business
Register for tax sole trader Ireland

How do I register as a sole trader in Ireland?

To register as a sole trader you need a PPS number. You can register on ROS.ie or you can for you can complete a form TR1.

If you want to stop being a sole trader you follow a similar process. You log into ROS.ie and click on “Other Services”. Click on “Manage Tax Registrations” then click on “Cease Registration” for Income tax and complete the form on the next page.

What are my filing obligations as a sole trader?

At a minimum you need to complete a self-assessment form. If you have a simple business you can complete it yourself. However, if it is too complex you will need to hire an accountant who can charge fees of €750 + VAT. 

Depending on your level of sales you may also need to register for VAT. Generally this needs to be completed every 2 months. This can be as low as every 6 months if your VAT liability is less than €3,000.

You need to register for VAT if your sales is above the following:

  • €37,500 if you are supplying services only.
  • €35,000 for distance selling into Ireland
  • €41,000 for persons making acquisitions from other European Union Member States.
  • €75,000 if you are selling goods
tax filing obligations sole trader ireland

What taxes do I pay as a sole trader in Ireland?

As a sole trader you can not expense your salary. The profit that is remaining is taxed at PAYE rates of 20% (€35,300) , 40% (above €35,300) plus PRSI & USC. You are entitled to a tax credit €1,500 for being self-employed (v employee of €1,650). The deadline for filing your self-assessment return is October 31st. 

As mentioned above, if you are registered for VAT you’ll also need to pay that every 2 months. 

Can I be an employee and a sole trader?

In Ireland you can be both an employee and a sole trader. When you complete your self-assessment you enter your income from your employment and your income or losses from your sole trader business. 

The benefit of being a sole trader and an employee is you can offset your losses from being a sole trader against your PAYE income. 

As a sole trader you can expense a percentage of your rent, heating, internet and electricity if you are working from home on your business.



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