Starting a side business

antodeco

Hi all,
As the title suggests, myself and the wife (assessed seperate) are thinking of starting a small side business. We both currently work, and this shouldn't change. The side business will be 95% at weekends, so we can continue to work.

The business will be low income, seasonal, and would probably account to less than 10k a year.

I've struggled to find a definitive answer on how the tax works, when we are both also full time PAYE/PRSI employees. Is there a minimum received income required before tax has to be paid , or will we be doubley hit as we both work?

Any info would be greatly appreciated.

Thanks

Avatar MIA

antodeco wrote: »

Hi all,
As the title suggests, myself and the wife (assessed seperate) are thinking of starting a small side business. We both currently work, and this shouldn't change. The side business will be 95% at weekends, so we can continue to work.

The business will be low income, seasonal, and would probably account to less than 10k a year.

I've struggled to find a definitive answer on how the tax works, when we are both also full time PAYE/PRSI employees. Is there a minimum received income required before tax has to be paid , or will we be doubley hit as we both work?

Any info would be greatly appreciated.

Thanks

You will pay tax on the profits of your new business (not income). This will be paid at your marginal rate.

Not sure what you mean by doubley hit.

You will continue to pay tax on your employment income under PAYE and under income tax rules on your side income.

phormium

If you are registering as a straight forward sole trader then it's quite simple really, it's just extra income and taxed at the same rate you are on (unless it pushes you into higher bracket if not already there). You still have just the same amount of tax credits so if these are all used up on your full time jobs which I imagine they are then you will pay tax on all the profit from your side business. It's not too different to just doing overtime except you will be able to deduct qualifying expenses/costs from turnover before arriving at the taxable figure.

antodeco

Thanks for the replies. I will be renting a storage unit for equipment and to run the business from, so I assume I can detect the vast majority of that cost from the income, as well as purchasing of the equipment. In reality, the first year will probably pretty much break even after all the expenses, so I assume I wont have to pay tax if it does in fact cost me more to setup than the amount of income I receive? The reason for this is the cost of the equipment/setup as well as transport costs as I will be using my own vehicle (will need to update insurance as I will be carrying goods).

Are there any incentives at the moment to start my own business? I know there is a tax exemption if you have been unemployed for the last 12 months, but not if there is full time employment? Additionally, as the current wages are in the higher rate, the tax payable on the earnings will be taxed at the higher rate?

For such a small amount of income/profit, would it be beneficial to register for VAT?

Thanks again

Avatar MIA

antodeco wrote: »

For such a small amount of income/profit, would it be beneficial to register for VAT?

Thanks again

Depends on your client base. Are you selling to the end user, whereby you adding on 23% VAT effectively makes you 23% more expensive.

If selling to businesses then they'll most likely not care about VAT. Or possibly (as the theory goes, prefer to deal with a firm that is VAT registered, as it is a mark of establishment).

Theoretically, you could offset your year one trade losses against your PAYE income, but Revenue have been known to ignore such small offsets initially*, but at a minimum you could carry forward losses against future trade profits.

* They may do, it's not set in stone.

There's tax relief on trade income for the first three years if you register a company, but possibly not worth the hassle.