Working as a Self-employed Individual
- Self Assessment
- Record keeping
- Account preparation
- What accounts data do I submit?
- How long must I keep records?
- What happens if I fail to keep proper records?
- Do I need to employ an Accountant?
- How will I know what tax I have to pay and when to pay it?
- What is Income Levy 2009
- Pay and File System
- Employer's PAYE/PRSI
- Value-Added Tax (VAT)
Self Assessment is a system which gives you greater control and responsibility over your tax affairs. It applies to people chargeable to Income Tax who are in receipt of income from sources, which are not chargeable to tax under the PAYE system, or where some, but not all of their tax on these sources of income is paid under PAYE.
Self Assessment applies for Income Tax purposes to:
- The self-employed (i.e. people carrying on their own business including farming, professions or vocations),
- People receiving income from sources where some or all of the tax cannot be collected under the PAYE system, for example: profits from rents and investment income,
- Foreign income and foreign pensions,
- Maintenance payments to separated persons,
- Profit arising on exercising various Share Options/Share Incentives.
I am going to start work as a self-employed person. What should I do?
If you are commencing work as a self-employed individual, you must firstly obtain a Personal Public Service (PPS) Number.
Once you have received your PPS Number, you must register for tax by filling in the appropriate Registration Form.
The Registration Forms are:
Form TR1 (PDF, 447KB) (Tax Registration): this registration form is for an individual/sole trader. It is also used to register Trusts and Partnerships.
Form TR2 (PDF, 1.25MB) (Tax Registration): ax Registration Form for Companies.
Form TR1 or TR2 as appropriate, can be used to register for any or all of the following:
- Income Tax/Corporation tax
- Employer's PAYE/PRSI,
- Value Added Tax (VAT),
- Relevant Contracts Tax (RCT).
You can also get these forms from the Revenue Website or Revenue Forms and Leaflets Service at LoCall 1890 306 706.
Yes. You must keep full and accurate records of your business from the start. You need to do this whether you send in a simple summary of your profit/loss, prepare the accounts yourself or have an accountant do it. It is important for you to remember that the figures which are contained in your tax returns, your accounts, or your summary of profits/losses, must be correct. The records you keep, must be sufficient to enable you to make a proper return of income for tax purposes.
You must bear in mind that you may need to keep accounts for reasons other than tax. For example, your bank may want to see your accounts when considering an application for a business loan.
What records must I keep?
The type of records you will need to keep will depend on the nature and size of your business. Business records can be kept on computer record.
The records kept must include books of account in which:
- All purchases and sales of goods and services, and
- All amounts received and all amounts paid out,
- Are recorded in a manner that will clearly show the amounts involved and the matters to which they relate.
All supporting records such as invoices, bank and building society statements, cheque stubs, receipts etc., should also be retained.
At the end of the accounting period, you will need to have details of:
- Your business takings,
- All items of expenditure incurred, such as purchases, rent, lighting, heating, telephone, insurance, motor expenses, repairs, wages etc.,
- Any amount of money introduced into the business and its source,
- The amount of any cash withdrawn from the business or any cheques drawn on the business bank account, for your own or your family's private use (these items are normally referred to as drawings),
- Amounts owed to you by customers, showing the total amount owed by each debtor,
- Amounts owed by you to suppliers, showing the total amount you owe to each creditor,
- Stock and raw materials on hand.
How should I record these transactions?
In order to keep control of your transactions a full "double entry" bookkeeping system is recommended. Any system which falls short of this should be capable of showing the amount and source of:
- All income,
- All purchases and other outgoings.
Simply keeping the bank statements for the business is not enough - it does not fulfil your requirements to keep proper books and records. Your accountant, if you have one, will advise you on a bookkeeping system suitable to your circumstances.
What type of Accounts will I need to prepare?
You will need to prepare and retain accounts as follows:
- A Trading Account,
- A Profit and Loss Account,
- A Capital Account,
- A Balance Sheet.
Depending on the circumstances and level of your trading activities, a Capital Account and Balance Sheet may not always be required.
Generally you are no longer required to submit your self-employed business accounts with your return of income. You must still however, prepare accounts as discussed above and then extract the relevant information from your accounts for entry in the Extracts From Accounts pages of the Return of Income Form, Form 11 (PDF, 806KB) or Form 11E (PDF, 552KB), as applicable.
You must keep your records for "six" years, unless your Inspector of Taxes advises you otherwise.
Failure to keep proper records or failure to keep them for the necessary six years, where you are chargeable to tax, is a Revenue offence. If you are convicted of a Revenue offence you face a heavy fine and/or imprisonment.
It is not necessary to employ an accountant or tax adviser in order to complete your tax return(s) and claim the various credits and reliefs due to you.
Self-Employed individuals pay tax under the self-assessment system.
There is a common date for the payment of tax and filing of returns, i.e. 31 October. This system, known as "Pay and File", allows you to file you return and pay your tax at the same time.
This new Income Levy is payable on gross income from all sources before any tax reliefs, capital allowances, losses, pension contributions or PRSI. The rates of the Income Levy are as follows:
- 1%: Income up to €100,100 per annum
- 2%: Income between €100,101 and €250,120 per annum
- 3%: Income in excess of €250,120 per annum
Exempt Categories - the levy does not apply:
- Where an individual’s income for a year does not exceed €18,304 per annum
- For over 65’s where their annual income does not exceed €20,000 per annum for a single individual or €40,000 per annum for a married couple
- For Full Medical card holders
- To Social Welfare payments
Self-employed individuals will make a payment of income levy along with their preliminary tax payment, and any balance will be collected when the final assessment issues.For more detailed information see Income Levy FAQ (PDF, 249KB)
The Pay and File system provides the facility for you, on a single date - 31 October, to:
- Pay your estimate of tax (Preliminary Tax) for Income Tax for the current tax year,
- File your tax return for the previous tax year for Income Tax and Capital Gains Tax,
- Pay any balance of Income Tax due for the previous year.
The single due date, 31 October, will allow you to pay and file at the one time. This date is referred to as the specified return date.
You can also avail of Revenue's On-Line Service, ROS , our interactive site, which provides a quick, secure and cost-effective way of meeting your Revenue obligations.
If you intend to employ other individuals in your business, you will have to register as an employer for PAYE/PRSI. This means that you must deduct tax and PRSI from your employee's salary and pay it over to Revenue. More detailed information is available in the Employer's Guide to PAYE (PDF, 1.17MB)
For more detailed information see Income Levy FAQ (PDF, 249KB)
Value Added Tax (VAT) is a sales tax. It is collected by VAT registered traders on their supplies of goods and services. Each trader pays VAT on goods and services acquired for the business and charges 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 Revenue. If the amount of VAT paid by you exceeds the VAT charged by you, the Collector-General will repay the excess. This ensures that VAT is paid by the customer and not by the business.
You must register for VAT if your annual turnover exceeds or is likely to exceed the following annual limits:
- Currently €75,000 in respect of the supply of goods.
- Currently €37,500 in respect of the supply of services.
If your annual turnover is less than the limits set out above you may "elect" to register for VAT. You should register for VAT even before starting to supply taxable goods or services, if it is clear that the limits will be exceeded when the trade or business starts. More detailed information is available in Booklet IT 49 VAT for Small Businesses (PDF, 423KB) or the more comprehensive VAT Guide (PDF, 1.2MB)