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Becoming Self-Employed in Ireland

Essential topics covered include:

  1. What does self employment mean?
  2. Definition of a sole trader
  3. Advantages and disadvantages of being self-employed
  4. The power of planning
  5. Sole trader VS a limited company in Ireland
  6. Registering as a sole trader
  7. Registering for tax as a sole trader

Are you currently an employee and dreaming of going solo?

Do you have a fantastic business idea tucked up your sleeve that you are ready to ignite?

Whichever road of the journey you are on, rest assured that our team is here to navigate you towards self-employment success. We appreciate that starting a business single-handedly can be simultaneously exciting and daunting; please know that we’re right behind you every step of the way!

Our expert guide is here to provide you with all the information you need to know to steer you towards the steppingstones of becoming self-employed in Ireland.

What does self-employment mean?

Being self-employed is when you no longer receive a salary as an employee, instead you are working for yourself. You can set up as a sole trader, partnership, or limited company when you start a business venture. For the purpose of this guide, we will be focusing on self-employed sole traders.

Definition of a Sole Trader

A sole trader is a structure where a small business owner, freelancer or contractor sets up and operates a business independently.

Advantages and disadvantages of being self-employed

Working in the realm of self-employment comes with it’s very own pros and cons. Let’s explore some together:

Advantages:

  • You may have been dreaming of this independence for quite some time; finally you now get to be your own boss.
  • Increased job satisfaction as you are passionate about what you do.
  • You can work to your own schedule; you can have flexible workings hours or days when and if needs be.
  • Similar to choosing your working periods, you also get to decide where you wish to operate from.
  • You will learn so much daily. Think about it, when you manage your own business, you look after all aspects of the running’s from customer service, finance to marketing – to name just a few!
  • You call the shots on decisions, whether it’s whom you wish to work with, projects to take on, business moves to make – you get to choose the perfect fit for you.
  • You will have opportunities to earn more money.

Disadvantages:

  • You will have to cover for your own sick leave and holidays.
  • You are solely responsible for keeping your books in order and paying your taxes on time.
  • You are exposed to financial risk. If your business fails, your assets could be used to pay creditors.
  • Your new business may require longer working hours than a regular day-to-day 9-5.
  • You might struggle to adapt to working in isolation in comparison to a lively office.
  • No employee benefits such as health insurance, dental cover and overtime pay apply.
  • Progress can take time.

Do you require any help?

With over 40 years of experience, we proudly provide a full range of accountancy and advisory services to individuals, sole traders, and companies. Our team is committed to helping you on your entrepreneurial journey. Should you require any assistance, please contact us.

The Power of Planning

‘’Without a plan, even the most brilliant business can get lost. You need to have goals, create milestones, and have a strategy in place to set yourself up for success.’’ – Yogi Berra.

It is believed that the average person can have up to 6000 thoughts per day. That’s quite a chunk, right? Individuals always have a wave of thought flooding through their minds and occasionally still at night. Have you ever had a golden nugget/lightbulb moment that quickly got lost during a busy time in your life? You’re definitely not alone!

There is great power in planning ahead, especially when it comes to your business. We highly recommend that you take the time to create a business plan and get everything down on paper. Think of a business plan as the blueprint to your business – it identifies where you are currently at and outlines how you will get to your end goal.

Why are business plans essential?

  • A plan clarifies the mission and goals of the business.
  • Identifies whether the business is feasible.
  • Allows the owner to spend time to overlook each aspect of the business.
  • The owner can prioritise essential tasks.
  • It is a support tool for seeking funding and investment.
  • The plan will help define your target market.
  • A business plan will map out and project the business cash flow.
  • A detailed plan will be the roadmap for your business.

Not sure where to begin? Fear not! You can get started on your business plan today. Download a free template HERE, courtesy of Enterprise Ireland.

Did you know?

Your Local Enterprise Office provides a range of complimentary support to people in business. Whether you are embarking on a new venture or wish to grow an existing business, your Local Enterprise Office can assist you with their offerings of advice, support, courses, workshops, guides and lessons. For further details, click the link below.

Sole Trader vs a Limited Company in Ireland

Sole Trader and Limited Company are two individual business structure options for individuals to choose from. Businesses need to understand the ins and outs of each structure. Should you wish to discuss both options and discover what would work best for you, our team will be happy to set up a call to discuss further.

Sole Trader

A Sole Trader is when an individual sets up and runs a business on their own. The process of becoming a Sole Trader is cost-effective and straightforward to set up. The owner of the business oversees every aspect of the company. Should the business face any hardship or financial difficulty, the owner is liable for the company’s debts.
+ Inexpensive to set up and maintain.
+ No Annual Returns to file.
+ Minimum cost implications for closure.
– Profit is taxed at personal tax rates instead of a corporation tax rate (12.5%).
– Limited scope is available for pension tax breaks.
– No limited liability.

Limited Company

A Limited Company is one of the more common types of structures here in Ireland. A limited company means the business is a separate legal entity. The owner is not personally liable for the debt if the business runs into financial difficulty, unlike a sole trader. Instead, the directors/shareholders are generally only responsible for the amount they have invested into the company.

+ Limited liability – you only lose what you invest.
+ Higher tax credits are available for directors.
+ Profits of a limited company are taxed at 12.5%
+ More favourable amongst customers and suppliers.
– Higher costs incurred for the setup and closure of a limited company.
– Additional compliance is required. The company can be penalised for any late filings.
– Company documents and accounts can be accessed publicly for a small fee.

Switching from sole trader to a limited company

If you decide to initially start your business journey as a sole trader, you can of course always make the switch to a limited company when you feel the time is right to do so. Should you require any assistance or further details about transitioning from a sole trader to a limited company, book a free consultation with our expert team TODAY.

Registering as a Sole Trader

To register as a sole trader in Ireland, you must complete the following steps:

Business name registration: A sole trader that wishes to operate under a business name rather than their own true name must register the name with CRO. For example, if Ms Emily Clarke traded under ‘’Emily’s Bakes’’, that business name must be registered.

The process for registering a business name is straightforward. Individuals must fill out an RBN1 form, this can be done electronically or by paper filing within one month of embracing the business name. The CRO fees range from €20 – €40. At present, receipt of the submission for registering a business name and certificate issue can take up to five weeks. Get started on your business name registration process today with CRO.

Registering for tax as a sole trader

Firstly, you must hold a PPSN number (personal public service number). A PPSN number is a unique reference number assigned to individuals for all dealings with public service departments, including Revenue. PPSNs are issued by the Department of Social Protection.

Your TRN (Tax Reference Number) will mirror your PPSN. Please note, your PPSN does not become your TRN until you register for tax.

Remember, as a sole trader, you are the boss and all decisions come down to you. A sole trader is responsible for keeping a record of all business activities.

If your net income reaches over €5000, you must register as a self-employed person with Revenue. Registration can be done online through Revenues fast and efficient eRegistration service.

Sole trader tax payments:

A sole trader will have to pay the following taxes:

  • Preliminary Tax – preliminary tax is an estimated combination of income tax, PRSI, and USC that you assume to pay each tax year. The deadline date for paying preliminary tax is 31 October.

TIP! Be sure not to underpay your preliminary tax or make late payments as you will be charged interest.

  • VAT (Value Added Tax) – VAT is a tax payable on sales of services or goods. VAT registration is obligatory once your business exceeds the following Irish threshold:
    • €35,000 for taxable persons specialising in mail order.
    • €37,500 for business service suppliers.
    • €75,000 for business goods suppliers.
    • €75,000 for businesses that supply both goods and services, where 90% of the turnover is generated from supplying goods.

Keep in mind should you decide to expand your business and hire employees in the future, you will have the following payments to cover:

  •  PAYE (Pay As You Earn) – With every employee wage/ salary, the employer calculates and deducts any income tax that is due. Employers are also obliged to calculate and deduct PRSI (Pay Related Social Insurance), USC (Universal Social Charge) and LPT (Local Property Tax). Once a company employs individuals, they must register as an employer and operate through a payroll system. The payroll software system feeds real-time reports to Revenue.
  • RCT (Relevant Contracts Tax) – RCT is a withholding tax that applies to certain payments by primary contractors to subcontractors in the fields of construction, forestry, and meat processing. All RCT compliance, filing and payments, is conducted through the ROS system.

 

Mark the Calendar

The yearly deadline date for paying your taxes and filing your self-assessed income tax returns is 31st October. Even if your business had very little trading or is at a loss, businesses must still comply and complete their accounts and return to Revenue before the deadline date. We highly advise you to have everything in order prior to that date to ensure you avoid any penalised interest charges.

We hope our guide on becoming self-employed in Ireland has been helpful to you. Should you have any further queries, please do not hesitate to contact us.

Whether you are a new business start-up or an established business looking for advice and guidance, our trusted and devoted team are on hand to assist you.

Book a FREE 30-minute consultation via zoom meeting or phone call with us.

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