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 (check out our post on company registration in Ireland for more information).

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) and in most cases, your Personal Public Access Number (PPSN) will become your Tax Reference Number (TRN) as a self-employed person.

If you need help registering as self-employed, talk to our Client Services Team about our Sole Trader services.

Sole Trader tax

  • Preliminary Tax

This is an estimate of tax due for the next tax year. It is paid on or before 31 October each year or Mid-November if you complete the income tax return on ROS.

  • 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.

  • Employers PAYE

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 or mid-November if you use Revenue’s Online System (ROS).

Tax returns for self-employed people are prepared on a self-assessment basis. You’ll need your bank statements, invoices, and receipts to accurately prepare tax returns. We recommend that you use online accounting software to manage your bookkeeping as it’s easy-to-use, time-efficient, and available wherever you are because they usually have a mobile app too.

To file a tax return,  you or your accountant assesses your bills, receipts and bank statements and calculates the amount of tax due. A form 11 needs to be completed and you pay the amount of tax due to Revenue.

Income tax returns completed on ROS can avail of a pay and file extension until mid-November, so it’s important to remember to register for ROS. Check out our ROS deadline guide for more information.

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. However, 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 €99+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 changing from a Sole Trader to 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 should you switch from Sole Trader to Limited Company?

To answer this question, consider what your plans are for your business. For example, do you plan to eventually incorporate your business into a Limited Company?

There are a few advantages of being set up as a Limited Company:

  1. Some companies will insist you are a Limited Company before they enter into contracts with your business.
  2. If you need to take out a business loan to expand the business, you might not want to be personally liable. As a Sole Trader, you are personally liable for repaying the loan. However, as a company, you are not personally liable since a company is considered a separate legal entity.
  3. Some organisations, like Enterprise Ireland, only provide funding to Limited Companies.
  4. If your business is making more money than you need as a salary, you could consider changing from a sole trader 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.

  • Talk to your Local Enterprise Office (LEO). Your LEO is a great place to go if you need support and grants to start or develop a business in Ireland.
  • Join a networking group. Check out platforms like Meetup or Eventbrite to check out events near you. Here you’ll meet like-minded individuals who can chat with you about your business and what you can expect.

Talk To Us

Accountant Online is here to help. We offer a number of free events/webinars for our Startup Community. They’re usually hosted by one of our Chartered Accountants or an industry expert so you can get advice about topics relevant to business owners in Ireland.

We’d love to talk to you about your new business idea – reach out to a member of our team today.