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Do freelancers that earn less than 37,500 need to register for VAT or Income tax?

  • 21-06-2016 10:54am
    #1
    armabelle
    Registered Users, Registered Users 2 Posts: 1,017 ✭✭✭


    I registered for VAT and Income tax this year thinking I would be working / earning more but with my second kid being born I just don't want to work such long hours and spend more time with the kids. Because of this I will not be earning more than 37,500 and I will cancel my VAT registration via ROS. When I went to do this however, I noticed that I was also registered for income tax. My question is: If I will be earning less than 37,500 euro per year do I still need to remain registered for income tax and how much income tax would I have to pay if I earned an annual salary of 30 ,000 euro for example?

    thanks a lot for your advice in advance!


Comments

  • #2
    seamus
    Registered Users, Registered Users 2 Posts: 68,317 ✭✭✭✭seamus


    You absolutely have to be registered for income tax - all income you earn from working is subject to income tax, whether that's €3,000 or €30,000.

    How much you pay will depend on your circumstances. Back-of-napkin figures suggest that tax for a self-employed person on €30k is about €6,000.

    You should make a habit of withholding a certain amount of your income aside; at least 20%; to cover your tax bill.


  • #3
    Sleeper12
    Registered Users, Registered Users 2 Posts: 17,190 ✭✭✭✭Sleeper12


    The threshold of 37500 isn't your personal income (income is what you earn, your wages). The threshold is the business takings.
    For example you may turnover 50,000 but have 20000 expenses. Your personal income in this case would be 30,000 but you would still need to be charging and paying vat.


  • #4
    armabelle
    Registered Users, Registered Users 2 Posts: 1,017 ✭✭✭armabelle


    seamus wrote: »
    You absolutely have to be registered for income tax - all income you earn from working is subject to income tax, whether that's €3,000 or €30,000.

    How much you pay will depend on your circumstances. Back-of-napkin figures suggest that tax for a self-employed person on €30k is about €6,000.

    You should make a habit of withholding a certain amount of your income aside; at least 20%; to cover your tax bill.

    Oh ok thanks for the breakdown so then I will not unregister for income tax and only unregister for VAT. With that out the way, how often do I have to pay income tax on my earnings and how is that managed normally?


  • #5
    armabelle
    Registered Users, Registered Users 2 Posts: 1,017 ✭✭✭armabelle


    Sleeper12 wrote: »
    The threshold of 37500 isn't your personal income (income is what you earn, your wages). The threshold is the business takings.
    For example you may turnover 50,000 but have 20000 expenses. Your personal income in this case would be 30,000 but you would still need to be charging and paying vat.

    ok so if I was billing clients VAT and I had a turnover of 50,000 and my expenses were 20,000, would I still need to be registered for VAT? since 30,000 is below the threshold of 37,500.


  • #6
    barneystinson
    Registered Users, Registered Users 2 Posts: 4,685 ✭✭✭barneystinson


    armabelle wrote: »
    ok so if I was billing clients VAT and I had a turnover of 50,000 and my expenses were 20,000, would I still need to be registered for VAT? since 30,000 is below the threshold of 37,500.

    Threshold for VAT registration is a turnover threshold.

    Threshold for income tax is an income threshold (ie taxable profit), currently €3,174.


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  • #7
    armabelle
    Registered Users, Registered Users 2 Posts: 1,017 ✭✭✭armabelle


    barneystinson wrote: »
    Threshold for VAT registration is a turnover threshold.

    Threshold for income tax is an income threshold (ie taxable profit), currently €3,174.


    so if I earn €3,173 per year, I wouldn't pay income tax?


  • #8
    barneystinson
    Registered Users, Registered Users 2 Posts: 4,685 ✭✭✭barneystinson


    armabelle wrote: »
    so if I earn €3,173 per year, I wouldn't pay income tax?

    I'm talking about registration thresholds, the point at which you become obliged to register and file a return, based on non-employment income.

    Whether in fact you have an income tax liability depends on all of your circumstances. For example if you have an employment that you earn 50k in, then you might have to pay around 50% in taxes/social insurance on your 3,173 of income. Likewise, it is 3,175 of self employed income. The only difference being that in the first case you should file a Form 12 tax return (effectively the return for a PAYE taxpayer), and in the second case you register as a self assessment taxpayer and file a Form 11 tax return.

    Rather than continue to ask a stream of questions here, I'd suggest you read some of the published material on Revenu's website and ask questions about anything you're still not clear on. On phone now, but I'll post relevant links up later.


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