Are You Liable for Sole Trader Tax?

By Kane Bergin

Starting your own business is a big step and the first thing you must decide is whether you will set up as a sole trader, partnership or a limited company. They are all fairly simple to set up, but that’s where the similarities end, and they all have different legal obligations.

The sole trader route has legal and tax responsibilities, although there are fewer than those related to partnerships and limited companies.

The obligation most people are aware of is sole trader tax, although this is not the only responsibility by any means. As well as sole trader tax, it could be necessary for you to VAT register, or employ people, which requires setting up a PAYE scheme.

Registering for Sole Trader Tax

The first thing that should be done when you start working for yourself, is to register for sole trader tax with Revenue. As a self-employed person, your sole trader tax will be paid through the self-assessment system. This means that you are ultimately responsible for filing your own tax returns, calculating the tax and paying it when it’s due.

This is where most people turn to an accountant for help, as the fines for getting it wrong start at 250 euros and can be much worse.

You will need to get into the habit of asking for a receipt or invoice for everything you buy related to your self-employment. This is because there are expenses that can reduce your profit and the amount of sole trader tax you will have to pay. These do not have to be given to Revenue initially, but they will require them if you are chosen for an audit. They will also want to see your bank statements and any other paperwork that supports the figures shown on your tax return. It is also important to keep a true and accurate record of your sales.

There are benefits to registering for sole trader tax. Any profits you make will be yours rather than the company’s, and this can encourage you to work harder. There are some expenses self-employed people can claim that employees can’t.

VAT in Ireland

If you are supplying goods in Ireland, the threshold for VAT registration is 75,000 euros. Before your turnover reaches this amount, you do not have to register, unless you are manufacturing goods from zero rated materials when the registration threshold reduces to 37,500 euros. There are different thresholds for services, and for dealing with goods sold abroad, like when you’re selling online. This is all very complex and the best advice anyone could give you is to seek the help of specialist professionals such as Kane Bergin and Company. They will be able to assist you and ensure you do not incur penalties and fines for late registration.

With VAT rates varying from zero to 23%, depending on the trade you’re in, many people are deterred from registering until it is absolutely necessary, but there can be advantages to taking this step.

Being registered enables you to claim back any VAT you pay out on materials, fuel, phones and anything else business related. Some people also feel it gives a business credibility as it shows they have taken the trouble to comply with their legal obligations and make enough sales to need to be VAT registered.

Becoming an Employer

As you get busier, you may find you need help with your business. There are so many things that need to be done to ensure your new venture runs smoothly. There is the administration, bookkeeping and marketing to name just a few.

You normally have three choices with these tasks. You can try and do everything yourself, which initially saves money but can take you away from the important job of running your business. You could outsource some of the jobs to make life simpler. Things such as your bookkeeping and VAT returns could be passed to the experts at Kane Bergin and Company, who at the appropriate time will pass them to the right department for your accounts to be completed and tax liabilities calculated. For some people who are liable for sole trader tax, this is the simplest solution, which is why so many take this option.

The third choice is to become an employer and have workers to help you. Whether this is a viable solution depends on what type of business you are. You need to be aware that the PAYE system in Ireland is very complex and unless you fully understand how it works you could fall foul of Revenue rules.

t is up to the person preparing the payroll to ensure that the correct amount of PAYE, PRSI and USC is deducted from the gross pay and sent to Revenue within the specified time. They also must produce P45s for any leavers and P60s at the tax year end.

It should be no surprise that payroll and bookkeeping are the two most common things that are outsourced to professionals, and why at Kane Bergin and Company we have departments dedicated to these.

Choosing the Right Professionals to Help with Your Sole Trader Tax

At Kane Bergin and Company, we have more than 30 years’ experience helping self-employed people with their sole trader tax. We can also help if you are running a limited company, in a partnership or any other type of venture. We deal with bookkeeping, VAT, PAYE, management accounts, financial returns for Revenue, we will act as your company secretary if you need one and can also provide you with financial control assistance. In fact, if you need help or advice with anything business related, you should give us a call to see what we can do for you. We will not charge you to come and have a chat to see if we can work together, so why not ring us on 01 969 6306 and book your free consultation.