When you become self-employed it means you are carrying on your own business rather than working for an employer and there are a number of things to take into consideration. Working for yourself can have a number of advantages and disadvantages. For example, it means you are in control of what you do, so you can organise your own hours. On the other hand, it can involve working very hard and you may no longer have a regular income.
When you start a business you can do so either as a sole trader, partnership or limited company. The type of structure you choose depends on the kind of business you are carrying on, with whom you will be doing business and your attitude to risk. Here we look at setting up as a sole trader. That is, when you set up a business on your own. Being a sole trader is relatively straightforward to set up, but if your business fails, all your assets could be used to pay your creditors.
Much of the process of preparing for self-employment is about starting a business. This is the same information whether you are a sole trader or a partnership or company. The guide to self employment Toil and Trouble (pdf) is available on the Department of Social Protection website. City and County Enterprise Boards and local development companies provide supports such as advice to local businesses that are starting up or developing – see ‘Where to apply’ below. You can find out how to start a business if you are coming to Ireland.
The main legal obligation when becoming self-employed is that you must register as such with the Revenue Commissioners – see section on ‘Tax’ below.
Registration of business name
You may carry on your business using your own name. If you wish to use a business name you must register your business name with the Companies Registration Office – see “How to apply” below. You will then be issued with a Certificate of Business Name which you must display prominently at your place of business. There is an information leaflet on registering a business name (pdf).
You may need to have a business account with your bank. This allows you to keep your business income separate from your personal income. In general, you will need your Certificate of Business Name to open a business bank account.
In order to set up as a sole trader you must register as self-employed for income tax with the Revenue Commissioners – see “How to apply” below.
As a self-employed individual you pay tax under the self-assessment system. You pay Preliminary Tax (an estimate of tax due) on or before 31 October each year and make a tax return not later than 31 October following the end of the tax year. You must keep proper records to allow you to fill out your annual tax return.
You must keep accounts which record:
- All purchases and sales of goods and services and
- All amounts received and all amounts paid out
You must keep supporting records of the above such as invoices, bank and building society statements, cheque stubs, receipts etc.
You may claim certain business expenses against tax as well as your contributions to your personal pension.
Further information is available in the Revenue booklets IT 10 A Guide to Self Assessment and IT 48 Starting in Business (pdf).
You must register for Value Added Tax (VAT) if your annual turnover exceeds or is likely to exceed the following annual limits: €75,000 in respect of the supply of goods or €37,500 in respect of the supply of service.
Subcontractors: If you are a self-employed subcontractor working in construction, forestry or meat processing you may apply for a C2 certificate. This will allow you to receive payments from a contractor without Relevant Contracts Tax (RCT) being deducted – see ‘How to apply’ below. There is detailed information about RCT for subcontractors on the Revenue website.
If you are self-employed you pay Class S PRSI contributions. This entitles you to a limited range of social insurance payments including, Widow’s/Widower’s Contributory Pension, Orphan’s (Contributory) Allowance, State Pension (Contributory), Maternity Benefit, Adoptive Benefit and the Standard Bereavement Grant. Class S PRSI contributions are paid at a rate of 3% on all income.
If your income is above €26,000 you also pay a Health Contribution on all income. You pay this directly to the Revenue Commissioners when you make your annual tax return.
You should register for Class S social insurance with the Department of Social Protection (DSP) - see ‘How to apply’ below. The DSP has published a leaflet PRSI for the Self-Employed-SW74.
Although you are not legally obliged to be insured when you are carrying on a business, it generally advisable to have insurance cover for various situations. In particular if the public have access to your premises you should have public liability insurance.
You may also want to look into other types of insurance such as health insurance. The Irish Insurance Federation provides a free insurance information service where you can obtain information and advice on all aspects of insurance.
If you are working from home you may need planning permission, for example, if you are using part of your home for business purposes or if you were to build a shed or an office in your garden. You should contact your local authority for advice about planning permission.
The Back to Work Enterprise Allowance Scheme encourages those receiving certain social welfare payments in Ireland to become self-employed. If you take part in the Back to Work Enterprise Allowance scheme, you retain a percentage of your social welfare payment for up to 2 years. If you are starting a business, you may get extra supports, for example grants for training, market research, business plans and access to loans to buy equipment. You may also get assistance in paying for public liability insurance – see “Where to apply” below.
If you are having difficulties with your creditors the Money Advice and Budgeting Service (MABS) is a free and confidential service for people in Ireland with debt and money management problems.
How to apply
To register with the Revenue Commissioners as a self-employed sole trader you must complete the tax registration form TR1 (pdf). This form can be also be used to register for VAT - see above. You will receive a “Notice of Registration” confirming that you are registered for income tax and, if applicable, for VAT.
When you register with the Revenue Commissioners you are automatically registered for Class S PRSI. For information on PRSI for the self-employed you can contact your local social welfare office or the Self-Employment Section of the Department of Social Protection.
If you are a self-employed subcontractor working in construction, forestry or meat processing you and the principal contractor must complete form RCT1 (pdf). To apply for a C2 you must complete form RCT5 (pdf).
To register your business name you apply to the Companies Registration Office (CRO) using Form RBN1 (pdf) or online using CORE (Companies Online Registration Environment).
For further information about the Back to Work Enterprise Allowance scheme contact the Employment Support Services of the Department of Social Protection.
Where to apply
Companies Registration Office
Line 1: Parnell House
Line 2: 14 Parnell Square
County: Dublin 1
Tel: +353 (0) 1 804 5200
Locall: 1890 220 226
Fax: +353 (0) 1 804 5222
Department of Social Protection
Dept.: Self-Employment Section
Line 1: Social Welfare Office
Line 2: Cork Street
Tel: (01) 704 3000
Department of Social Protection
Dept.: Employment Support Services
Line 1: Social Welfare Services Office
Line 2: Government Buildings
Line 3: Shannon Lodge
Line 4: Carrick-on-Shannon
Tel: (071) 967 2616
Locall: 1890 92 79 99