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Being self-employed is a very common legal structure used in Ireland to operate a business. In 2020, self-employed people accounted for 14.75% of all of those employed in Ireland.
The registration process for being self-employed is very simple and can be done through ROS.ie. There are a number of benefits of being self-employed, particularly if you are already an employee through the PAYE system. One of the biggest is being able to offset your self-employed losses against your employee income. It’s also very easy to stop being self employed. This can be done through ROS.ie.
You do not need to register as being self-employed if your non PAYE income is less than €5,000 and your PAYE income is less than €30,000.
To register as being self-employed in Ireland you simply register on ROS.ie. For this you will need a PPS number. Go to ROS.ie and click on “Register for ROS” and then “Apply for your RAN”.
On the next screen select “An individual or company” and from the drop select “Income Tax”. Enter your PPS number in the “Registration Number” field. Complete the rest of the steps as indicated.
There are a number of benefits of being self-employed in Ireland:
Here is a list (which is not exhaustive) of the expenses you can claim in Ireland if you are self-employed. We’ve tried to focus on some of the more obscure items. In general, any cost which arises as a result of engaging in business can be expensed.
There are a few exceptions which are not so obvious.
To stop being self-employed is relatively straight forward if you don’t have a complex business. You simply log onto ROS.ie, go to “Other services” and click “Manage Tax Registrations”. From here you can click on “Cease Registration” for Income Tax.
If you have registered for VAT you’ll also need to cancel this. You will also need to complete any outstanding returns.
If you don’t have access to ROS.ie you’ll need to complete a TRCN1.
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:
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:
We’ve written an article on a limited company vs a sole trader.
You should set up your business structure as a limited company in the following circumstances:
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.
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:
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.
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.
The fee charged by professionals for closing a limited company in Ireland is roughly €300 + VAT which includes the CRO fees as well as advertising in a national newspaper.
In order to close your limited company you need to apply for a voluntary strike off with the CRO. The CRO has a number of conditions which must be satisfied in order to close your company.
When the above have been completed it takes roughly 3 months for your company to be taken off the CRO register.
If you have a very simple business it is possible to do this yourself. If you have any doubts about how to complete the above steps it would be better to seek the advice of an accountant or a professional. If you complete any of the above steps incorrectly it could end up costing you a lot more in the long run.
Andrew Lambe, director of the Company Bureau has stated the new company registrations in the state have fallen by 39% in the first half of March 2020. This figure is expected to accelerate as demand falls and unemployment increases.
Andrew went further to say: “Based on new orders and enquiries, we are expecting to see the numbers in April down 50pc or even more. This is extremely worrying for the Irish economy.”
Some of this slow down is also partly due to the precautions the CRO has taken. Initially the CRO was completely closed. Now they do not accept deliveries from couriers. This reduced service will have slowed down the number of applications they can process.
As a result of the restrictions being placed on how businesses operate and the agile nature of SMEs, the number of .ie domain names has increased. David Curtin, CEO of the IEDR has stated they have seen an increase of roughly 30% in new .ie domain name registrations in April compared to the same period last year.
The increase in websites on the Irish market will be fuelled by the resilience of Irish entrepreneurs trying to find new ways to reach their customers. Selling online offers new opportunities to small businesses who would have traditionally sold through their brick and mortar premises. Without establishing a digital presence traditional businesses have no route to market until the lockdown restrictions are lifted.
There are also a number of supports available such as the trading online voucher run by the Local Enterprise Offices. This grant covers 90% of the costs for small businesses who are trying to get online up to a maximum of €2,500
Below are some of the supports available to help your business get started in addition to the existing supports. For a complete list of supports please visit https://dbei.gov.ie for further information.
It’s important during these difficult times you are aware of what supports are available to you. SMEs in Ireland are facing unprecedented challenges and need all the support they can get. If you are facing difficulties please note there are plenty of other supports available.
The Local Enterprise Offices also offer free mentoring advice. They offer both group advice and one to one advice. This is currently being delivered online through zoom.
The aim of the restart grant is to provide funding to micro and small business to help them with the costs of reopening and employing people. It is available to businesses which have a turnover of less than €5m, employ less than 50 people and are closed or have had a projected reduction of 25% in turnover to June 2020. The application is available online from all local authorities.
It is relatively straightforward to set up a private limited company in Ireland. You can set up a single director company in Ireland which requires a minimum of two people. One EEA resident director and one company secretary. If you don’t have a company secretary you can hire a company to do it which costs roughly €250 + VAT per year. If you are not an EEA resident director you can purchase a non-resident director bond for roughly €2,199 + VAT which lasts for 2 years.
If you are considering starting a business it’s important to note in general, it is only worthwhile setting up a limited company when you have an established business. Only when you are generating a significant profit should you set up a limited company. The amount depends on your situation. If you are not taking a salary from the business and you’d like to reinvest all of the profits in the business then anything over €10,000 is sufficient to justify setting up a limited company. If you are taking a salary then the net profit less your salary should be well above €10,000.
Often you are advised to set up a company sooner than is needed because there are more fees involved for the person giving you the advice. The average self-employed tax returns costs €250 – €350. If you have a company the return can cost €1,000 – €1,500. Make sure you get impartial advice on when is the best time for you.
You can expense your salary unlike a sole trader which takes the full residual profit as a salary. Also, if you travel a lot employees (including directors) are allowed to claim civil servants rates. In some cases these can be higher or lower than actual expenses depending on your circumstances. These rates are not available to sole traders. Also, as an employee, if you work from home you can claim the e-worker / home worker allowable expense of €3.20 per day.
You are not held personally liable for the debts of the company. Your personal assets are protected. Unlike a sole trader who is held personally liable for the debts of the company.As a sole trader if you default on your debts your personal assets such as your home can be sold. If this is a significant advantage really depends on the nature of your business. If you are only supplying your labour then it’s unlikely you’ll have debts. If however you’re buying goods on credit to sell later then it is likely you will have more of a risk.
Some startup funds require you to have a limited company. If you are a sole trader you can not apply for certain grants.
If you work as a contractor some potential clients will not work with individuals. This is mostly due to the fact they don’t want you classified as an employee. As a result of this most contractors work through a limited company in Ireland.
If you setup a company in Ireland you may be exempt from paying corporation tax for up to 3 years. There are a number of conditions set out on Revenue’s website. The main one being you cannot claim relief if you are transferring an existing trade to a company. Also, your corporation tax must be less than €40,000. If your corporation tax is less than €60,000 partial relief may apply.
The setup costs and the annual costs are much higher than a sole trader as mentioned above. To set up a company costs €250-€300 + VAT and the annual accounting fees can be €1,000 -€1,500 per year. A sole trader has no setup costs, you simply register for income tax with Revenue. A self-employed tax return costs €250 – €350.
As a limited company you have much less privacy. The accounts you submit to the CRO can be viewed by anyone for a cost of less than €15. Within those accounts a directors salary will also be disclosed.
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 losses 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.
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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:
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 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.
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:
It is important to note you can not expense certain items when calculating your tax liability. These include:
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.
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.
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.
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.
There are a number of low cost options available to you. You can hire a freelancer (affiliate link) to build one for you. Or you can use an application like Wix. Wix is designed for those who have no technical background. No coding is required it’s all online with a graphical interface. It costs roughly €124 (incl. VAT) per year. If you would like more advice on business tools you can look at a new website we are starting called Softintro.com.
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.
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.
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:
The content in this article is not financial or tax advice. If you need advice specific to your situation please consult a professional or contact Revenue.