Started up in oct 2014, what next

shugy

I started up as a sole trader last oct/nov and now have a letter from revenue asking me for preliminary tax for 2015 and any balance of income tax for 2014!

First of all, why is there a need for this preliminary tax and what happens to one if he doesnt pay it. To me this seems very unfair if one is supposed to pay tax without even making profit in that year. What if someone doesnt have the money to follow into next year and cant pay, ar they just supposed to seize trading because of this.

Since i have started last year, i would say ive earned over 20k with about 18k profit. I know ive to pay 20% on my earnings but dont know anything about the USC or PRSI. Am i liable for these and if so, how much.

Another thing, im on the btwea and started up as a sole trader and i know im sort of tax free in my first year but would this also include the USC and PRSI if im liable.

gerrybbadd

shugy wrote: »

I started up as a sole trader last oct/nov and now have a letter from revenue asking me for preliminary tax for 2015 and any balance of income tax for 2014!

First of all, why is there a need for this preliminary tax and what happens to one if he doesnt pay it. To me this seems very unfair if one is supposed to pay tax without even making profit in that year. What if someone doesnt have the money to follow into next year and cant pay, ar they just supposed to seize trading because of this.

Since i have started last year, i would say ive earned over 20k with about 18k profit. I know ive to pay 20% on my earnings but dont know anything about the USC or PRSI. Am i liable for these and if so, how much.

Another thing, im on the btwea and started up as a sole trader and i know im sort of tax free in my first year but would this also include the USC and PRSI if im liable.

Have a look here:

http://www.revenue.ie/en/tax/it/leaflets/it10.html

BailMeOut

Your 2015 preliminary will be 100% of your final liability for 2014. Since you only have income for two months then your preliminary will (should) be low although I believe there is a rule for partial years that you need to be aware.

Best advice as a fellow sole trader is get an accountant for at least your first one of two years. I know it is an expense you want to avoid but I find they pay for themselves in tax savings. You will also learn a great deal from them and soon will understand process better and be confident doing your own filings via ROS.

irelandspurs

Btwea you pay no income tax in the first 2 years but you still pay paye and usc. I just paid €500 preliminary toward prsi which I think is the minimum you pay whether or not you made money.
I to started in November but only as I knew I had a contract to start in January and wanted everything to be up and running ready for the start date. I have no income to declare for November and December 2014 as I never worked.

Spook_ie

irelandspurs wrote: »

Btwea you pay no income tax in the first 2 years but you still pay paye and usc. I just paid €500 preliminary toward prsi which I think is the minimum you pay whether or not you made money.
I to started in November but only as I knew I had a contract to start in January and wanted everything to be up and running ready for the start date. I have no income to declare for November and December 2014 as I never worked.

That doesn't sound right, you sure it's not keeping your benefits or a percentage of them you mean, most benefits are taxable even if they don't take you into the taxable brackets which is unlikely to be the case now you are self employed

http://www.citizensinformation.ie/en/social_welfare/irish_social_welfare_system/claiming_a_social_welfare_payment/taxation_of_social_welfare_payments.html

Spook_ie

shugy wrote: »

I started up as a sole trader last oct/nov and now have a letter from revenue asking me for preliminary tax for 2015 and any balance of income tax for 2014!

First of all, why is there a need for this preliminary tax and what happens to one if he doesnt pay it. To me this seems very unfair if one is supposed to pay tax without even making profit in that year. What if someone doesnt have the money to follow into next year and cant pay, ar they just supposed to seize trading because of this.

Since i have started last year, i would say ive earned over 20k with about 18k profit. I know ive to pay 20% on my earnings but dont know anything about the USC or PRSI. Am i liable for these and if so, how much.

Another thing, im on the btwea and started up as a sole trader and i know im sort of tax free in my first year but would this also include the USC and PRSI if im liable.

Your tax for 2014 will be due on 31st October 2015 along with a tax return for 01.01.2014 to 31.12.2014, you will need to put in income from your business since Oct 2014 and any income from prior to that such as Social Welfare payments, the majority of which will count as taxable income or from PAYE, which though already taxed still should show on your return for that year.

The preliminary taxation is a complete pain in the ass, but if you work out how much you owe them for 01.01.2015 to 31.10.2015 and pay them from the money you've put aside for the tax you should be fine.

I don't think you're tax free under BTWEA that merely means that you keep 100% of your benefits for year one ( which are more than likely taxable ) and 75% for year 2

PRSI Class S will be payable as self employed and USC is payable on all income over a certain limit excluding SW payments, so for the first couple of years I would suggest employing an accountant until you get used to it and then go ROS.

The various citizens advice pages are a good place to start reading, you'll find things like this

The Back to Work Enterprise Allowance is paid directly into your bank or building society account each week. The allowance cannot be paid into a mortgage account.

You must contact the Department of Social Protection immediately if your self-employment ends or you take up employment. You do not have to pay tax, PRSI or Universal Social Charge on the Back to Work Enterprise Allowance but you may have to pay tax, PRSI and Universal Social Charge on any income you get from self-employment.

http://www.citizensinformation.ie/en/social_welfare/social_welfare_payments/social_welfare_payments_and_work/back_to_work_enterprise_allowance.html



EDIT having seen that there is now also a "Start Your Own Business Releif" availiable, suggests even more so that employing an accountant is a good idea for the first couple of years, thanks and apologies irelandspurs

irelandspurs

I keep my benefits for 2 years ,100% for the first year and 75% for the second year. I am income tax exempt for the first 2 years while on the back to work enterprise allowance.
http://www.citizensinformation.ie/en/money_and_tax/tax/income_tax_credits_and_reliefs/start_your_own_business_scheme.html

Spook_ie

Noted from the http://www.citizensinformation.ie/en/money_and_tax/tax/income_tax_credits_and_reliefs/start_your_own_business_scheme.html#ld1a9a link is this little bit which will help about preliminary tax

You do not need to be preapproved for the scheme. Instead, you claim this relief when you make your income tax return. Note that new businesses get an extension to the normal filing date for your first tax return. For example if you set up your new business in 2014 then your first tax return is not due until 31 October 2016.

Revenue's Online Service (ROS) can calculate the amount of income tax, USC and PRSI that you owe.

If you do not want to use ROS to file your tax return and if you file a paper tax return before 31 August, Revenue will send you a calculation of the amount of tax, USC and PRSI you owe.

The Start Your Own Business Relief only applies to income tax payable on the profits from your business. It does not extend to PRSI and Universal Social Charge (USC) so you will be liable to pay PRSI and USC on any profits earned in your new business.

shugy

Thanks for all the advice. Im going to take the advice of getting an accountant however what sort of money would i expect to pay. I know this is how longs a piece of string kind of question but lets say i earned 20k and have receipts for 4k for tools,fuel and other expenses and also take into that im on the BTWEA, what would be a rough estimate i should be paying.

BailMeOut

shugy wrote: »

Thanks for all the advice. Im going to take the advice of getting an accountant however what sort of money would i expect to pay. I know this is how longs a piece of string kind of question but lets say i earned 20k and have receipts for 4k for tools,fuel and other expenses and also take into that im on the BTWEA, what would be a rough estimate i should be paying.

I pay around €400 and am positive I save at least this (+ a lot more). Also have peace of mind knowing it is done right but would try get a recommendation from someone you know for an accountant as some will be better than others.