Becoming self-employed for the first time can be an exciting, challenging and anxious transition—particularly when it comes to calculating and paying your tax liability for the first year. If you were previously a PAYE employee, you relied on the straightforward pay-as-you-earn (PAYE) tax system to take care of your tax liability for you.
Now that you’re self-employed, that tax responsibility rests with you. But it needn’t be a frightening prospect! Read on to learn how to register as self-employed and get set up for self-assessment to pay your taxes and file your tax return.
Registering as Self-Employed
If you have recently established a business, started working as a sole trader or became a landlord, congratulations on joining the ranks of the Irish self-employed! The primary legal responsibility for any self-employed person is registering as such with Revenue, which you are obliged to do once you begin doing business through self-employment.
If you are doing business as a sole trader or partnership, you can register easily using Revenue’s online service (ROS). Alternatively, you may complete and submit the tax registration Form TR1, available on the Revenue website. If you are a non-resident landlord or business owner, you must complete the Form TR1 (FT).
If you are setting up a company and need to register for tax, you must first register the company with the Companies Registration Office and obtain a CRO number. Once you have your CRO number, you can register for tax using ROS or by completing and submitting Form TR2.
Keep in mind that self-employed people must register for Value Added Tax (with some exceptions) if annual turnover is likely to exceed €75,000 in the supply of goods or €37,500 in the supply of services.
The Self-Assessment Tax System
All self-employed people are required to complete an annual self-assessment to calculate and pay their tax liability and file their annual tax returns. In addition to individuals whose primary income comes from self-employment, you also must self-assess if you receive income from sources where some or all of the tax is not collected through PAYE, such as:
• Rental income,
• Investment incomes,
• Foreign income or pensions,
• Maintenance payments made to separated persons or from dissolved civil partnerships
• Fees and other income not subject to PAYE
• Profits earned by exercising share options or incentives
If you’re self-employed, you should maintain records of all purchases and sales of goods and services, as well as all amounts received and all amounts paid out. If you have recently become self-employed, you have until the filing deadline of October 31st of the second year of self-employment to submit your tax return.
Registering for Self-Assessment
The easiest way to register for self-assessment tax is through Revenue’s ROS system. However, it’s important to note that once you have registered through ROS, it is mandatory that you file all payments and returns through ROS. Alternatively, you may complete and file Form TR1 or Form TR2 for companies.
When you register for self-assessment tax as a self-employed person, you are automatically signed up for PRSI. Most self-employed people will pay Class S PRSI contributions, which entitles you to a limited range of social insurance payments, including:
• widower’s or surviving civil partner’s contributory pension
• guardian’s payment (contributory)
• state pension (contributory)
• maternity benefit
• adoptive benefit
There are additional tax benefits available to self-employed people, such as the Earned Income Tax Credit worth €550. There are also additional requirements for people who must complete self-assessment, including guidelines for documentation to keep and important deadlines to note.
It’s worth doing your homework to ensure you have registered your information correctly, are keeping documentation in order and are aware of the expectations and rules concerning self-employment tax liability and self-assessment tax returns.
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