Setting up as a Sole Trader
A Sole Trader is a popular type of business structure. As the name suggests, it’s set up by one person who owns and manages the business.
If you’ve decided to set up as a Sole Trader, we’re here to support you each step of the way.
Registering as a Sole Trader in Ireland has fewer compliance requirements than new companies so you’re already off to an easier start! There are no financial statements, no accounts audits, and an easier registration process.
Many entrepreneurs start out as Sole Traders because it is quicker and easier to set up. But there is limited room for growth so it’s worth knowing that you can change from Sole Trader to Limited Company at a later stage.
If you need help registering as self-employed in Ireland, we’re here to help you with the whole process. From registration to preparing tax returns, we can support you each step of the way. Talk to us about our services for Sole Traders in Ireland.
1) Write a business plan
Writing a plan is crucial for any business, no matter how big or small. Your business strategy will include how you expect your business to achieve its goals, satisfy customers and sustain a competitive advantage.
Registering as a Sole Trader in Ireland means you should be an Irish tax resident. So if you don’t already live here, or you’re not planning on moving here, we don’t recommend setting up as a Sole Trader here.
2) Get a Personal Public Service Number (PPSN)
Everyone living in Ireland should already have a PPS Number. But you may not have one yet if you have just moved to Ireland. A PPSN is a unique reference number which helps you access social welfare benefits, public services and information in Ireland. To get a PPS number you have to show that you have a need for it. Your Sole Trader income tax registration in Ireland can be used as evidence of this. You apply for a PPS number with the Welfare office.
3) Figure out if you need to hire employees
As a Sole Trader, you have the sole responsibility for the business. Anyone who works for you will be an employee of the business and you will need to operate a payroll system.
If you employ people, you can outsource your payroll requirements to a professional. Get in touch with us if you need help understanding what services you need to register as a Sole Trader in Ireland.
4) Do you need insurance?
Sole Traders are personally liable for all the debts of the business. This means that your personal assets, such as a family home, can be seized and used to settle unpaid business debts.
We highly recommend that you thoroughly consider the risks before deciding on registering as a Sole Trader in Ireland.
5) Keep your business receipts
As a Sole Trader in Ireland, any expenses that are wholly and exclusively for the purpose of your trade can be deducted against your income. This means you can potentially reduce your tax bill at the end of the year. However, be sure to check your business expenses with an accountant as your idea of expenses may differ from Revenue’s.
6) Make sure setting up as a Sole Trader is the right choice
Everything you earn as a Sole Trader is essentially your income and that income is subject to tax up to 52%. You can deduct any expenses that are directly related to your business against your income.
However, all income after expenses (your profit) is subject to a high tax rate of 52% (this is the sum of income tax @ 20-40%, PRSI @ 11% and USC @ 4.5%). You should consider the total business income versus what you actually need to spend.
If you are making more money than you need as a salary, you should consider setting up a Limited Company because there are more tax efficient ways to pay yourself. For example, salary, dividends and pension.
Talk to us if you need help deciding between a Sole Trader or Limited Company. We’re always happy to help you each step of the way!
7) Taxes you need to pay as a Sole Trader
Preliminary Tax should be paid on or before 31st October each year.
It consists of Income Tax, PRSI, and USC and is a calculation of what you expect to pay for a tax year. This is essentially an advance payment on next year’s tax bill. So you are essentially paying tax on income that you have not yet earned. In addition, you can be charged interest for each day (or part of a day) past the Preliminary Tax deadline. Therefore you need to estimate what your tax liability will be and put aside a portion of your profits each year to cover your Preliminary Tax liability.
Value Added Tax (VAT)
You will need to register for VAT if your business meets certain criteria. Check out our guide on how to register for VAT in Ireland. It’s important to know that you don’t charge VAT or claim VAT back until you are VAT registered. Filing VAT returns allows you to claim back the VAT you have paid as part of your business expenses. You must also know how to charge VAT in Ireland, the EU and internationally on sales. Get in touch with us if you need help registering for VAT in Ireland. We are always happy to help.
If you are employing people, you must register as an employer and operate payroll.
An employer is responsible for deducting the appropriate PAYE tax, USC and PRSI from your employees’ wages as well as maintain a Payroll Report which is reported to Revenue on a real-time basis. So it’s important that your business is able to maintain a timely payroll system. Our Simple guide to payroll provides more information about payroll.
Relevant Contracts Tax (RCT)
A principal contractor is someone who pays a subcontractor to carry out activities on behalf of their business. If you are a principal contractor, you will need to pay RCT. Subcontractors in construction, forestry, and the meat processing industry are expected to pay this tax. However, Revenue specifies that “you are not a principal contractor if the only construction work that you are involved in is on buildings or land for your own use or the use of your employees”. RCT should be registered when you register for tax through ROS. An appropriate tax agent can fill out the required details for you.
8) Register your business name with the Companies Registration Office (CRO)
The CRO states that registration of a business name is required if “an individual uses a business name which differs in any way from his/her true surname. It makes no difference whether the individual’s first name or initials are added”.
For example, Sole Trader Anne O’Brien needs to register her business name if she traded as O’Brien Apparel but not if she traded as O’Brien or Anne O’Brien.
Keep in mind that someone else can use your business name even if it is registered.
If you want protection around your business name, you should consider opening a Limited Company. New companies cannot use the same name as an existing company that is registered with the CRO. We carry out company name checks on all our new incorporations.
Get in touch with us to discuss Irish Company Formation. We’re always happy to help.
9) Set up your business bank account
It’s best practice to keep your business income separate from your personal income.
Separating your bank accounts also makes it easier to business expenses and personal expenses.
To set up a business bank account in Ireland you will generally need one form of ID verification; e.g. passport or driver’s licence, and two forms of address verification of home address in Ireland; e.g. electricity bill or current bank account statement.
We recommend dropping by your local bank and enquiring about their business accounts.
10) Complete tax returns before 31 October each year
You need to file a self-assessed Income Tax return and pay your tax liabilities before 31 October each year. This applies whether you made a loss or your business had minimal trading.
The information required includes;
Income details including rental income, foreign income, and exempt income.
Your tax credits, allowances, relief, health expenses, and capital gains.
Revenue provides more details on what you need to file a tax return in Ireland.
What do I need to do next?
Is registering as a Sole Trader in Ireland the best choice for your business? If you’re not sure, talk to our Client Services Team so we can help you make the right decision.
There are a lot of factors to consider so let us help you.
You can call us on +353 (0)1 905 9364 or email email@example.com.