What is a Sole Trader?
A Sole Trader is a single person setting up a business and being self-employed.
It is a quick and easy way to start a business in Ireland. Registering as a Sole Trader in Ireland is done by registering with the Irish Revenue Commissioner. There isn’t too much paperwork to do and there are no registration fees to pay.
If you have questions about registering as self-employed, we’re here to support you. We’ve collated the most common questions about registering as self-employed in Ireland.
Should I be a Sole Trader or Limited Company?
Choosing between registering as a Sole Trader or Limited Company can be a difficult decision to make. There are pros and cons to both and you need to decide which one will suit your business needs the best.
Registering as self-employed is relatively straightforward and is the quickest option when forming a business. However, registering as a Sole Trader can mean that you will miss out on the benefits of registering a company.
The most popular advantage of setting up a company in Ireland is the 12.5% Corporation Tax rate. Setting up as a Sole Trader also means accepting risk to your personal assets if the business was unsuccessful.
You should, therefore, consider the level of risk when deciding your business structure.
If you need specific advice, talk to our Client Services Team now. We’re here to help you make the right choice!
What taxes do self-employed people pay?
There are many different taxes that self-employed people are liable to, and it depends on your business activities. Self-employed people need to have a Personal Public Service Number (PPSN) before they can register for tax.
Tax registration In Ireland is done through Revenue Online System (ROS).
If you need help registering as self-employed, talk to our Client Services Team about our Sole Trader services.
Taxes in Ireland
This is an estimate of tax due for the next tax year. It is paid on or before 31 October each year.
Universal Social Charge (USC)
Self-employed people are liable to pay USC if their gross income exceeds €13,000 in a year.
Pay Related Social Insurance (PRSI)
Self-employed people make PRSI contributions under Class S. This is applicable to all self-employed people who earn more than €5,000 a year.
Value Added Tax (VAT)
There are certain conditions that make businesses liable for VAT. If your business is registered for VAT, you need to charge VAT and submit VAT returns to Revenue.
Self-employed people can hire staff to help in their business. If so, they need to register for Employer’s PAYE, pay Employer’s PRSI, and operate a payroll system.
Relevant Contracts Tax (RCT)
Self-employed subcontractors that work in construction, forestry, or meat processing need to register for RCT and submit RCT returns to Revenue.
How do I file tax returns as a self-employed person?
Self-employed people need to prepare their tax returns by completing a Form 11 on or before the 31st of October each year.
Tax returns for self-employed people are prepared on a self-assessment basis. This means that you, or an accountant, will have to assess the amount of tax due, declare and pay that amount to Revenue when the tax returns are due.
Tax returns are usually completed online through Revenue’s Online System (ROS). You’ll need your bank statements, invoices, and receipts to accurately prepare tax returns.
Our recommendation: Xero online accounting software
We recommend businesses use online accountancy software to keep all your records in one place and on the cloud.
Moving your accounts online means all your invoices, receipts, and bank statements are easily managed and information is available in real-time.
Talk to our Client Services Team about purchasing a subscription to Xero online accounting software.
What is the difference between a company name and a business name?
This is a common question we get asked because they sound like the same thing. But a company name has the word Limited after it and a business name doesn’t.
Sole Traders also don’t need to have a business name whereas companies must have a company name.
Those who are self-employed can use their own name as their business’ name. For example, Mary Smith can run her business as ‘Mary Smith’.
If Mary Smith wanted to use the business name ‘Mary Smith Designs’, she would need to register a business name through the Companies Registration Office (CRO). This is one of the only instances self-employed people interact with the CRO. (As the name suggests, it is more for companies).
We can register a business name for €89+VAT. Talk to our Client Services Team if you need help.
Can I pay myself a salary?
Self-employed people don’t have a salary or take wages. Everything they earn is essentially their income.
That being said, it’s important to remember you need to pay taxes out of that income at the end of the year. So it’s a good idea to set aside a portion of your income each month for your tax bill.
Sole Trader’s earnings are also known as ‘drawings’ – this is the money you take out of the business for personal reasons.
If you want more tax-efficient ways to pay yourself, you might consider incorporating into a Limited Company. Directors of companies have more scope on how they pay themselves.
I'm not a resident in Ireland, can I set up as a Sole Trader here?
You need to be a resident in Ireland to set up as a Sole Trader here. Self-employed people need to have a Personal Public Service Number (PPSN).
If you are currently living in Ireland on a Stamp 4 Visa, you are entitled to establish and operate a business in Ireland.
Feel free to talk to our Client Services Team if you have questions about registering as self-employed in Ireland. We’re happy to talk you through the different registration and accountancy services we offer.
When to switch from Sole Trader to Limited Company?
What are your plans for your business? Do you hope that one day you’ll incorporate your business into a Limited Company?
Here are some reasons to change from Sole Trader to Limited Company in Ireland:
- Some companies may insist you are a Limited Company before they enter into contracts with your business.
- If you need to take out a business loan to expand the business, you may not want to be personally liable for the business loan. As a Sole Trader, any risk is a personal risk whereas as a Limited Company you are not personally liable as the company is a separate legal entity.
- Some organisations, like Enterprise Ireland, insist that you are a Limited Company to receive funding.
- If you’re making more money in your business than you need as a salary, you could consider transferring into a company for tax-saving reasons.
Check out our guide to Changing From Sole Trader To Limited Company In Ireland for more information.
What support is there for new businesses in Ireland?
Starting a business in Ireland is very exciting, but it can come with compliance procedures you’re not used to.
Accountant Online is here to help. We offer free, live monthly webinars for our Startup Community. They’re hosted by one of our Chartered Accountants so you can get advice on setting up a business in Ireland.
We’d love to talk to you about your new business idea. Talk to us on webchat, call +353 (0)1 905 9364 or email email@example.com.