Being a PAYE Worker and a Sole Trader

CowsGoBoo

Hi,
I am a Paye worker and in my spare time I am looking to do some contract work for myself to earn some extra cash.
When it comes to filling out my tax returns what will I need to look out for?

Do I perform my return based solely on my income as a sole trader?
Does my employer need to know anything with regard to me now doing work as a sole trader?
Is this going to be complicated?

Cheers,
Ed

seamus

At the end of the year, you fill out a form 11 where you declare both your taxed income (as stated on your P60) and your other income from the contract work. Revenue then calculate the tax due.

It would be worth sitting down with a tax advisor for an hour or so to discuss what to do, as there will be allowances and per diems you may be able to claim in the course of your additional work.

relax carry on

CowsGoBoo wrote: »

Hi,
I am a Paye worker and in my spare time I am looking to do some contract work for myself to earn some extra cash.
When it comes to filling out my tax returns what will I need to look out for?

Do I perform my return based solely on my income as a sole trader?
Does my employer need to know anything with regard to me now doing work as a sole trader?
Is this going to be complicated?

Cheers,
Ed

First stop is Revenues guide to self assessment.
http://www.revenue.ie/en/tax/it/leaflets/it10.html
You then need to register as self assessed. Your income tax return will be on all sources of income. Why not look at a form 11 to see what you need to complete. Use the ROS offline application to fill in details to get used to the form to see if you could do it yourself.
If its too confusing then contact an accountant.

Flukey

I am in a similar position to the OP. I am a PAYE worker looking to supplement my income. A few questions: It asks on the form about spouse's income. Am I correct in saying that if the spouse's details are included and the spouse is exclusively on PAYE, that none of the spouse's benefits (eg. pension, (p/m)aternity etc.) would be affected by the other spouse being self-assessed? In effect would they still be treated as a normal PAYE worker with all the rights and entitlements that gives? I know that self-employed lose some. If the PAYE worker wants to keep those benefits, what is the best approach? Should any reference to the spouse be left off or can they safely be added with no threat to their standard PAYE entitlements?

Another question that is problematic is in relation to turnover. The reason for going for self assessment is to try to find other work. You may find loads, you might find none, so predicting turnover is practically impossible. Can you just leave it blank or say you don't know.

It seems overly complex for the ordinary individual who just wants to do some nixer-style work legitimately and pay tax on it and still have the majority of their income on PAYE. They are not setting up a business or going self employed in the true sense, just leaving the room to earn a few extra euro where the occasion arises through part time work or a contract or whatever.

When it comes to doing the tax return, it is also overly-complex for such a person. All they want to do is pay tax on that untaxed income. Being then asked about things like share dividends and interest, which are taxed at source anyway, as well as a whole host of questions that seem totally irrelevant is annoying. If you are a standard PAYE worker, how much interest or dividends you get is irrelevant and your tax credits don't extend to it. I understand that your untaxed income may be affected by your tax credits and there is some relevance in other income, but something taxed at source that is ignored in the PAYE system, you would imagine would be treated the same.

There should be a better way for a PAYE worker who just wants to supplement their income to have it taxed, without going through so much red tape. If there was some way you could be on PAYE and be allowed work for a number employers, even if you just got one day of work, that would make more sense. As it is, correct me if I am wrong, if a PAYE worker with one employer, got offered a few hours work by another employer on a one-off occasion in the entire year, they have to go on to self-assessment to do it legitimately. It does seem over the top.

mrs vimes

Hi Flukey, that's a lot of questions, but I'll do my best...

Flukey wrote: »

I am in a similar position to the OP. I am a PAYE worker looking to supplement my income. A few questions: It asks on the form about spouse's income. Am I correct in saying that if the spouse's details are included and the spouse is exclusively on PAYE, that none of the spouse's benefits (eg. pension, (p/m)aternity etc.) would be affected by the other spouse being self-assessed? In effect would they still be treated as a normal PAYE worker with all the rights and entitlements that gives? I know that self-employed lose some. If the PAYE worker wants to keep those benefits, what is the best approach? Should any reference to the spouse be left off or can they safely be added with no threat to their standard PAYE entitlements?

It's not really that being self-employed loses you benefits, it's that they are only available if you are paying PRSI at class A like a PAYE worker. If you are both self-emp and PAYE then you are paying PRSI at class A so you get the benefits in question. The spouse is covered or not on their own PRSI record regardless of what the other spouse is doing. As an aside, pension and maternity are both covered by self-emp class S anyway, it's jobseekers benefit and disability benefit that mostly are covered.

Flukey wrote: »

Another question that is problematic is in relation to turnover. The reason for going for self assessment is to try to find other work. You may find loads, you might find none, so predicting turnover is practically impossible. Can you just leave it blank or say you don't know.

Is it for VAT registration purposes that you wish to predict turnover? The levels are pretty high (37,500 pa), so if you are looking at not doing a whole lot of work then not a problem, and if you find that you get more work than expected then you can register then.

Flukey wrote: »

It seems overly complex for the ordinary individual who just wants to do some nixer-style work legitimately and pay tax on it and still have the majority of their income on PAYE. They are not setting up a business or going self employed in the true sense, just leaving the room to earn a few extra euro where the occasion arises through part time work or a contract or whatever.

I agree that the FORM 11 is pretty intimidating-looking, but if you leave out all sections that don't apply to you it gets a lot easier . Also, if you find that you just do a bit of extra work (nixers totaling less than eur3174) during the year you can just declare it on your FORM 12 and pay the tax by reducing tax credits for the next year.

Flukey wrote: »

When it comes to doing the tax return, it is also overly-complex for such a person. All they want to do is pay tax on that untaxed income. Being then asked about things like share dividends and interest, which are taxed at source anyway, as well as a whole host of questions that seem totally irrelevant is annoying. If you are a standard PAYE worker, how much interest or dividends you get is irrelevant and your tax credits don't extend to it.

Only the basic rate of tax is deducted from share dividends at source so a higher rate taxpayer has a further liability, or in the case that a person didn't use all their tax credits they may be due a refund. Tax liability on interest is fully covered by DIRT but in certain circumstances this DIRT can be refunded so I assume that is why the question is there.

Flukey wrote: »

I understand that your untaxed income may be affected by your tax credits and there is some relevance in other income, but something taxed at source that is ignored in the PAYE system, you would imagine would be treated the same.

Not sure what you mean here I'm afraid, could you rephrase please?

Flukey wrote: »

There should be a better way for a PAYE worker who just wants to supplement their income to have it taxed, without going through so much red tape. If there was some way you could be on PAYE and be allowed work for a number employers, even if you just got one day of work, that would make more sense. As it is, correct me if I am wrong, if a PAYE worker with one employer, got offered a few hours work by another employer on a one-off occasion in the entire year, they have to go on to self-assessment to do it legitimately. It does seem over the top.

Fortunately for the many people who do get a few nixers it is possible to stay in the PAYE system by using FORM 12 and declaring it directly to Revenue at year end. Also, at present PRSI is not levied on income where it is covered in this way whereas it is due on "proper" self-emp income.

Hope this helps.

Sybil