Contracting as a sole trader

Tom2000

Hi all,

I work as an IT professional and I'm considering to quit permanent position (full-time employment) and start contracting. I believe in my case sole trader is a good legal form of self-employment.

I wish to get a piece of advice on following topics from you, though:

1. As a sole trader I'd have to pay PAYE tax. Could I still benefit my tax credits? Maybe is there any online calculator I could youse to estimate my income (I've failed to google one)?
2. How is PRSI calculated?
3. Can I claim back the value of the laptop I definitelly need to do my job?
4. How much time to register sole trader and how much it costs?

In general, if there are any pieces of advice it'd be great if you could drop me a line here on boards.ie

Cheers,
Tom

1. You will still pay income tax as before, but not under the PAYE system, as you will be self employed. In general, the same tax credits apply, apart obviously from the employee (PAYE) credit.

2. No quick answer to this. http://www.revenue.ie/leaflets/it10.pdf has all the answres for you.

3. Can I claim back the value of the laptop I definitelly need to do my job?
Yes, would have thought so. I presume this would be treated as a fixed asset - would capital allowances apply? Some other posters may have thought on this.
4. How much time to register sole trader and how much it costs?
See the form above.

Best of Luck

blue4ever

PRSI is calculated at a different rate for the selfemployed – but you still have to pay it. You can claim tax allowances – but, again, they are slightly different.
If you but anything for your business (an I mean the actual business0 they you can allow it – in the case of a laptop its depreciated over a few years. But it is allowable. The VAT Portion is also allowed to be claimed (if you reg of VAT).
It costs nothing to ‘register’ – if you want register a business name (www.cro.ie ) and trade under that name.

I took that leap about two years ago. I went through the same things – but in the end the best thing I did was get a local accountant – I got a good one and she brought me through all the steps. I pay here to do all my returns at the year end and its worth ever penny/cent.

Keep every receipt you ever get! Honest.

Try and get an account system going at home – it makes everybody’s life real easy

Good luck

mik_da_man

Just a point to note - some employers may require you to be a Ltd Company when you are on a contract for them.
So this is worth checking out.

I had to go down the road of Ltd Co because of this.

egan007

After lots of feckin around I just got an accountant and saved myself time and money.

Basically you earn money. (say 10000 for simplicity) in one year
You spend 5K earning that money (expenses)

That leaves you with 5K profit.

Say your TFA is 2K

Your taxable income is 3K you pay this a the normal 21% lower rate.

Not sure what the PRSI rate is maybe 4% - You pay this of the 3K aswell afaik....

VAT is not income tax.
You Pay VAT and Charge VAT (if you are registered)

You pay VAT on things you buy - take 21% of all purchase.
You charge VAT on things you sell - take 21% of all you sell.
Subtract the two figures and that's the VAT you owe / are due back.

E.g.

I paid a total of 2000 in VAT.
I added VAT 1900 of VAT to my sales
I over paid 100 Euro VAT - I'm due that back.
Vise versa..

VAT rates vary depending on the product - most rates are 21%


This is the basic 'Jist' if you want a good accountant recommended I can do so.

On the Ltd, You need an accountant to advise you on Ltd or sole trader, it's easy to switch anway - Personally I've Never come across the requirement to be a limited company.