When you start working for yourself, you are classed as ‘self-employed’ and a ‘sole trader’. A sole trader is when you set up a business on your own.
In general, you are a self-employed sole trader if you:
- Run your own business and are responsible for its successes and failures
- Have several customers
- Regularly sell goods or services to make a profit
- Are paid for the service you provide
- Decide how, when and where you work
It is relatively easy to become a sole trader (see ‘How to become a sole trader’ below). However, if your business fails, your personal assets could be used to pay back your creditors (people or organisation your business owes money to).
Set up a business without becoming a ‘sole trader’
If you want to keep your personal assets and business assets separate, you can set up a ‘limited company’ instead. Read about the different types of business structures, including how to set up a business (or ‘partnership’) with other people.
If you are a non-EEA national, you can read about coming to set up a business or invest in Ireland.
How to become a sole trader
If you choose to become a sole trader, you are self-employed and you do not have a business partner. This means you are personally responsible for the business. So, if the business fails, your personal assets can be used to repay any loans to your creditors.
To legally become a sole trader, you must register as self-employed with Revenue. Once you have registered, you pay income tax as a self-employed person, rather than through the PAYE system (which is used for employees).
As a self-employed sole trader, you become eligible for certain tax reliefs. Read more in ‘Paying tax as a self-employed person’ below.
You do not have to use a business name. But, if you choose to use a business name, you must register your business name with the Companies Registration Office (CRO) – read more below.
Registering your business name
If you want to use a business name, you must register the name with the Companies Registration Office (CRO) within one month of adopting the business name.
You can do this in 2 ways:
- Download and complete the paper form RBN1 (pdf). There is a €40 fee to register a business name using the paper form. Visit the CRO website for information on payment methods
- Register online using CORE (Companies Online Registration Environment). There is a €20 fee to register your business name electronically
You will then get a ‘Certificate of Registration’, which you must display prominently at your place of business. In general, you will need the Certificate of Registration to open a business bank account (a business account lets you keep your business income separate from your personal income).
You can read more about registering your business name on the CRO website, or download the CRO leaflet on registering a business name (pdf).
Paying tax as a self-employed person
To set up as a sole trader, you must register for income tax with Revenue as a self-employed sole trader, using the Revenue Online Service (also called ‘ROS’).
If you cannot register online
If you cannot register online, you can register using the paper tax registration form TR1 (pdf). You can also use this paper form to register for VAT.
You will then get a ‘Notice of Registration’ confirming that you are registered for income tax and, if applicable, for VAT. Find more information about registering for tax as a sole trader on the Revenue website.
Once you have registered with Revenue
When you are registered with Revenue as a self-employed person, you pay income tax, PRSI and the Universal Social Charge under the self-assessment system.
This means you pay preliminary tax (an estimate of your income tax, PRSI and Universal Social Charge due for the current year) on or before 31 October each year. You will be charged interest for any late payments.
Pay and file system
By 31 October each year you must:
- Pay your preliminary tax for that year (see explanation above)
- File your annual tax return for the previous year
- Pay any balance of tax due for the previous year
Read more about paying tax as a self-employed person.
You must keep accounts to record:
- All purchases and sales of goods and services
- All amounts received and all amounts paid out
You must also keep supporting records, such as invoices, bank and building society statements, and receipts.
Tax relief (the Earned Income tax credit)
In 2022, self-employed traders can claim the lower of either:
- An Earned Income tax credit of €1,700
- A tax credit worth 20% of your qualifying earned income
However, if you also qualify for the PAYE tax credit (for example, if you are an employee of another company, as well as working for yourself), the combined value of these 2 tax credits cannot be more than €1,700.
Claiming business expenses
You can claim certain business expenses against tax, as well as your contributions to your personal pension.
For example, you can claim for expenses directly linked to your business, such as:
- Employees’ wages
- Rent bills for the business premises
- Accountancy fees
Read more about claiming for business expenses on the Revenue website.
Get a refund of previously-paid PAYE income tax
You may be entitled to a refund of PAYE income tax that you paid over the 6 years before you started a business. This is called the Start Up Refunds for Entrepreneurs (SURE) scheme.
You must register for Value Added Tax (VAT) if your annual turnover exceeds (or is likely to exceed) the following annual limits:
- €75,000 for the supply of goods, or
- €37,500 for the supply of services
Read more about the SURE scheme and estimate your potential refund on the Gov.ie website.
If you are a self-employed subcontractor
If you are a self-employed subcontractor working in construction, forestry or meat processing, you can get detailed information about Relevant Contracts Tax on the Revenue website.
Paying PRSI as a self-employed person
If you are self-employed, you pay Class S PRSI contributions. This entitles you to a limited range of social insurance payments (for example, you are not covered for any short-term payments, including illness and disability payments).
Class S PRSI contributions are paid at a rate of 4% on all income, or €500, whichever is the greater. If you earn less than €5,000 from self-employment in a year, you are exempt from paying Class S PRSI but you may pay €500 as a voluntary contributor.
When you register with Revenue (see ‘Paying tax as a self-employed person’ above), you are automatically registered for Class S PRSI. You can get information on PRSI for the self-employed from your local Intreo Centre or Social Welfare Branch Office.
You can also contact the Self-Employment Section of the Department of Social Protection – see contact details under ‘More information’ below. Or, you can read the Department’s leaflet about PRSI for the Self-Employed (pdf).
If you employ (or are helped by) family members
Most employees must pay PRSI. However, if you are a self-employed sole trader, and you employ or are helped in the running of your business by specified family member(s), these family members are not covered by the social insurance system. This is known as family employment.
There are different arrangements for family members working in a 'limited company', or two or more family members who operate a business as a 'partnership'. Read about the different types of business structures.
Read more about employing family members and PRSI.
Other things to consider
You are not legally obliged to be insured when you are carrying on a business, but you are advised to have insurance for various situations. For example, if the public has access to your business premises, you should have ‘public liability insurance’.
The Irish Insurance Federation has a free insurance information service, where you can get information and advice on all aspects of insurance.
If you are working from home, you may need planning permission.
Planning permission is needed if you want to significantly change how you use your land or buildings. For example, you will need planning permission if you want to:
- Convert your garage into a workshop for business use
- Open a crèche in your home
- Open a bed and breakfast with more than 4 guest bedrooms
Supports for becoming self-employed
If you are starting a business, you can apply for funding and grants from a range of sources, including:
- Your Local Enterprise Office
- Microfinance Ireland
- Enterprise Ireland
See the range of business funding and grant opportunities available.
If your application for credit is refused by one of the participating banks, you can apply to the Credit Review Office to have your case reviewed.
Getting advice on starting a business
If you need help planning your business, or need advice about how to get started, you can contact your Local Enterprise Office.
You can also apply to New Frontiers, which is a national development programme for early-stage entrepreneurs. The programme involves practical and interactive workshops, as well as one-to-one mentoring.
Or, you can read our pages on: