Setting up as a Sole Trader in Ireland

A Sole Trader is a popular type of business structure in Ireland. As the name suggests, it is registered by one person who owns and manages the business. It is different from setting up a company in that a Sole Trader is solely liable for the business and a company is a separate entity from its directors – to learn more about the differences between a Sole Trader and a Limited Company, check out our guide for a comparison of the two business structures.

Many of our clients choose to register as a Sole Trader in Ireland because it has fewer compliance requirements than new companies, there are no financial statements, no accounts audits, and it’s an easier registration process.

Registering as a Sole Trader in Ireland is straightforward, but you should be aware of the requirements once your business is set up and make sure that setting up as a Sole Trader is the right business structure to be.

In this guide, we’ll take you through all the general requirements of registering as a Sole Trader in Ireland, so you know what to expect as a Sole Trader, what you need to do to be registered, and how to remain compliant with Revenue.

1) Have a business plan

Writing a business 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.

If you have plans to grow your business in the future – for instance, seek equity finance or business loans, expand into other markets, or apply for government business grants and supports, you should consider what that means for your business structure. You can always change from a Sole Trader to a Limited Company at a later stage, so it’s worth understanding those requirements now in case you need to switch in the future.

2) Evaluate your expected level of income / turnover

Everything you earn as a Sole Trader is essentially your income and that income is subject to tax up to 55%. You can deduct any expenses that are directly related to your business which will save on your tax bill – but it’s worth planning your business in the event that you reach the higher tax rate.

We recommend that you 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 a Limited Company. We’re always happy to help you each step of the way!

3) Make sure that you have a Personal Public Service Number (PPSN)

A PPSN is a unique reference number that helps you access social welfare benefits, public services, and information in Ireland. Everyone living in Ireland should already have a PPSN but you may not have one yet if you have just moved to Ireland.

To get a PPSN, 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.

Because you need to be a resident in Ireland to be a Sole Trader, you should visit your local Welfare office in order to apply for a PPSN.

4) Tax Registration - TR1 for individuals

To register as a Sole Trader in Ireland, you need to register for Income Tax. You can register for Income Tax through Revenue’s eRegistration service or through a Tax Registration Form (TR1).

(You will have access to Revenue’s eRegistration service if you have existing access to Revenue’s myAccount or ROS (Revenue’s Online System).

Usually, your Tax Reference Number (TRN) will be the same as your PPSN, but please note that your PPSN does not become your TRN until you register for tax.

If you already have an existing PPSN and you are registered for ROS / MyAccount you will usually get your TRN within 5 days. If you have only recently received your PPSN, you will have to submit the TR1, which can take 2-3 weeks to process.

To outsource the requirement of tax registration, talk to our Client Services Team about our services. We offer fixed-fee tax and accounting services for Sole Traders in Ireland and we are happy to support you with your compliance requirements.

Taxes as a Sole Trader

Sole Traders are taxed similarly to Limited Companies. Everything that you earn is classed as your income and subject to Income Tax rates - up to 55%. On top of that, there may be other taxes you need to pay, such as VAT or RCT. For more specific advice on your situation, talk to our Client Services Team - we're happy to help!
  • Preliminary Tax

    Preliminary Tax is paid on or before 31st October each year and it 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 - i.e. tax on the income not yet earned. Make sure that over the year, you save for your Income Tax bill AND your Preliminary Tax liability.

  • Value Added Tax (VAT)

    You will need to register for VAT if your business meets certain criteria. You don’t charge VAT or claim VAT back until you are VAT registered so this simplfies the invoicing process. Get in touch with us if you have questions about VAT registration in Ireland - we're here to help!

  • Employers PAYE

    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.

  • 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”.

5) Revenue's Online System (ROS) registration

Now that you are tax registered, you can register for ROS if you are not already registered. ROS allows you to view your current tax position, file tax returns and forms, and allows you to pay your tax bill.

If you need help registering for ROS – talk to our Client Services Team and we’re happy to discuss our services with you.

Setting up on ROS for the first time

Apply for your ROS Access Number (RAN)
You will need your Tax Reference Number (TRN).
Apply for your Digital Certificate.
Note that you will need your RAN.
Save your Digital Certificate.
You will not be able to access ROS until you complete this step.

6) 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 setting up as a Limited Company.

7) Consider taking out business 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 used to settle unpaid business debts.

It’s worth considering business insurance in cases of any misfortunes that could affect your business, such as fire, flood or theft, public, employer, or product liability, or business interruption. Talk to your local insurance branch for more information on the types of cover they offer.

8) Have a bookkeeping process

Any expenses that are wholly and exclusively for the purpose of your trade can be deducted against your income. You can claim tax-deductible expenses in your Income Tax Return to save you on your tax bill at the end of the year.

It’s important that any expense receipts and computations (e.g. mileage) are correctly calculated and recorded so that your tax returns are accurate. Remember – you only file your tax returns once a year and doing regular bookkeeping will greatly benefit you during tax time! On top of that, if you are VAT registered, you need to file VAT returns, and your receipts and invoices are also required to calculate how much you owe, and how much you can claim back.

We recommend that you use online accounting software to keep track of your business expenses, manage your cash flow, and send out professional invoices.

9) Set up your business bank account

It’s best practice to keep your business income separate from your personal income through a specific business bank account.

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

Finally, when you register as a Sole Trader, you are obliged to file Income Tax Returns before 31 October each year. Note that your first Income Tax return is due the following year, after you set up – i.e. if you register as a Sole Trader in Ireland in 2021, your first tax return is due in 2022.

Income Tax Returns are self-assessed, which means that you need to calculate your own tax bill or outsource the requirement to an accountant.

Income Tax returns are required even if you made a loss or your business had minimal trading. It’s also important to note that late filings will incur fines and penalties so make sure that you speak to a professional if you need help meeting your deadlines.

Obtaining a Tax Clearance Certificate

A Tax Clearance Certificate is confirmation from Revenue that your tax affairs are in order. As a Sole Trader in Ireland, there are many different instances where you may be asked to provide a Tax Clearance Certificate so it’s important that you keep on top of your tax returns and payments.

When is a Tax Clearance Certificate is usually required:

  • Seeking State money (e.g. Government contracts, grants, schemes)
  • Obtaining licences (e.g. excise licence, road transport licence).
  • Applying for a mortgage with a financial institution

Starting out as a Sole Trader

Setting up as a Sole Trader is straightforward and relatively quick when compared to setting up a Limited Company. There are certain risks involved with starting out as a Sole Trader and we advise that you learn about the difference between Sole Trader and a Limited Company if you’re not sure which route to go down.

If you need specific advice about your situation, talk to our Client Services team via phone, email, video call, or live chat – we’re here to help you make the right decisions!

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