The main legal obligation when becoming self-employed is that you must register as such with Revenue. In order to set up as a sole trader you must register as self-employed for income tax with Revenue – see ‘How to apply’ below.
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.
Since 1 January 2011 the Universal Social Charge has replaced the health and income levies. You pay this directly to Revenue when you make your annual tax return.
You must keep accounts which record:
- All purchases and sales of goods and services and
- All amounts received and all amounts paid out
You must keep supporting records of the above such as invoices, bank and building society statements and receipts.
You may claim certain business expenses against tax as well as your contributions to your personal pension. Further information on tax is available on selfemployedsupports.ie and in the Revenue booklets IT 10 A Guide to Self Assessmentand IT 48 Starting in Business (pdf).
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.
If you are self-employed you pay Class S PRSI contributions. This entitles you to a limited range of social insurance payments including, Widow’s, Widower’s or Surviving Civil Partner’s Contributory Pension, Guardian’s Payment (Contributory), State Pension (Contributory), Maternity Benefit, Adoptive Benefit and the Standard Bereavement Grant. In 2013 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 avoluntary contributor.
You should register for Class S PRSI with Revenue – see ‘How to apply’ below. The Department of Social Protection has published a leaflet PRSI for the Self-Employed-SW74.