Quick Question on Self Employed Tax

burly

Hi All,

I am recently self employed as a sole trader, starting in June 2012, and registered with revenue for income tax accordingly. I was in PAYE employment up to April 2012.

I am currently sole trading, and keeping records of income in and out, transactions, overheads etc etc.

My question is am I right in saying that I do not have to pay any tax on my self employment income until 31st October 2013? And if so, for what period will I have to pay tax for? Will it be the period from June 2012 to October 2013?

I am just trying to project how much money I need to start setting aside now, to cover the tax bill in October 2013.

Would appreciate any advice.

nompere

If you do accounts for your first year of trading, to 31 May 2013, then 7/12ths of the profits of that period will be taxed for 2012. That tax doesn't fall due until October 2013.

Your tax liability for 2013 will be based on the profits of the first twelve months of trading - which is likely to be the same set of accounts. You will be paying preliminary tax in October 2013 for the year 2013, and that figure will need to be at least the same as your liability for 2012.

If you haven't followed this then you really need to be talking to a professional.

decoratinghouse

I thought you could also decide to submit on the Form11 your 12 month accounts ending in the relevant tax year. It asks for the start and end dates of your accounts so why does it have to be apportioned. It would be difficult every year to be apportioning some expenses.

decoratinghouse

What income do I include on my Tax Return?
Your tax assessment is normally based on your actual income arising in the tax year from 1 January to the following 31 December. However, if your income consists of profits from a business, trade, profession or vocation you may opt to prepare your accounts for an accounting period that ends within the tax year. Assessments in respect of any other income i.e. investment income, rental income, foreign pension or foreign salary are all based on the actual income arising in the tax year (i.e. from 1 January to the following 31 December).

This is from revenue.ie

smeharg

decoratinghouse wrote: »

I thought you could also decide to submit on the Form11 your 12 month accounts ending in the relevant tax year. It asks for the start and end dates of your accounts so why does it have to be apportioned. It would be difficult every year to be apportioning some expenses.

The are special rules for in a startup situation. In tax year 1, in this case 2012, you are taxed on actual profits from date of commencement to 31 December. In the second year you are taxed on the profits for the accounting year ending in the tax year, in this profits for the year to 30 June 2013.

In my opinion it's much simpler to prepare accounts to 31 December each year.