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Tax for self-employed people

Information

The main legal obligation when becoming self-employed is that you must register as a self-employed person with Revenue. You pay tax on the profits from your business and on any other income that you have.

If you make a late payment of any taxes due by you, you will be charged interest from the due date to the date when your payment is received.

Rules

As a self-employed person you pay income tax under the self-assessment system, once a year.

You pay Preliminary Tax (an estimate of tax due for your current trading year) on or before 31 October each year and make a tax return for the previous year not later than 31 October.

Example:

If your accounting year is from 1 January to 31 December each year, you will pay Preliminary Tax for 2014 by 31 October 2014, based on an estimate of your liability for the full year. At the same time you will make a tax return for 2013 and pay any taxes outstanding for that year.

If you file your tax return online using the Revenue Online Service (ROS) you can file your return up to 2 weeks after 31 October.

Revenue will assess your liability for income tax, PRSI and the Universal Social Charge based on the information supplied by you and any amounts that you owe are paid directly to Revenue. You are entitled to the normal income tax credits and reliefs.

You must keep proper records which include:

  • All purchases and sales of goods and services and
  • All amounts received and all amounts paid out

You must keep supporting records (for example, invoices, bank and building society statements, cheque stubs and receipts). You do not have to send them in to Revenue, but you must keep them in case of a Revenue audit, that is, an inspection.

You can claim certain business expenses against tax, such as purchase of goods for re-sale, wages, rent, rates, repairs, lighting and heating, running costs of vehicles or machinery used in the business, accountancy fees, interest paid on business loans, leasing payments on vehicles or machinery used in the business. as well as contributions to your personal pension (up to certain limits).

If you are working from home you may be able to claim a proportion of household bills such as telephone, heating, lighting etc.

You can find more information on self-employment in Revenue’s A Guide to Self Assessment IT10, which includes information how to fill in your tax return and important deadlines. Revenue also has information on registering for tax and about the business expenses that you can claim against income. Your local Revenue office can also help you with any questions that you may have.

Subcontractors: If you are a self-employed subcontractor working in construction, forestry or meat processing there is detailed information about Relevant Contracts Tax on Revenue's website.

Universal Social Charge, PRSI and VAT

USC: Everyone is liable to pay the Universal Social Charge (USC) if their gross income is over €10,036 in a year.

An extra charge of 3% applies to any self-employed income over €100,000 regardless of age. This means that self-employed people pay a total of 10% USC on any income over €100,000. The USC does not apply to social welfare or similar payments. You pay your USC with your preliminary tax payment.

PRSI: Self-employed people pay Class S PRSI on their income.

You must register for Value Added Tax (VAT) if your annual turnover is more than or is likely to be more than €75,000 for supply of goods or €37,500 for supply of service.

VAT: As a trader you pay VAT on goods and services acquired for the business and charge VAT on goods and services supplied by the business. The difference between the VAT charged by you and the VAT you were charged must be paid to the Revenue. If the amount of VAT paid by you exceeds the VAT charged by you, Revenue will repay the excess. This ensures that VAT is paid by the ultimate customer and not by the business.

If you are registered for VAT Revenue will send you a form VAT3 which must be returned with the payment not later than a specified date. Normally, VAT returns are made every 2 months, but there are special arrangements for small businesses who can pay at less frequent intervals.

Page updated: 8 July 2014

Contact Us

If you have a question relating to this topic you can contact the Citizens Information Phone Service on 0761 07 4000 (Monday to Friday, 9am to 8pm) or you can visit your local Citizens Information Centre.