Sole trader tax

Hearty80

Hello
I'm just about to register as a sole trader but unfortunately am totally lost when it comes tax. I will be providing a service which will be run from my home, obviously I have no idea how much i will turnover but hoping it will be around 20k. Would anyone be able to explain how much income tax I will have to pay on this? My other half is currently a paye worker. I spoke to an accountant this morning but am even more confused after our chat. Basically she wanted €80+vat per month to take care of it all for me. Does that sound reasonable, but it is all online so I'm unsure if that would suit, thanks to anyone who can help 😊

Calahonda52

Are you going to reg for VAT.
.
Are you jointly assessed for tax?

Will Yam

Hearty80 wrote: »

Hello
I'm just about to register as a sole trader but unfortunately am totally lost when it comes tax. I will be providing a service which will be run from my home, obviously I have no idea how much i will turnover but hoping it will be around 20k. Would anyone be able to explain how much income tax I will have to pay on this? My other half is currently a paye worker. I spoke to an accountant this morning but am even more confused after our chat. Basically she wanted €80+vat per month to take care of it all for me. Does that sound reasonable, but it is all online so I'm unsure if that would suit, thanks to anyone who can help ��

Your taxable income will be your gross income (20k)?, less any expenses you incur in relation to the business.

I don’t have the details to hand but roughly the following figures apply (you can find the precise details on revenue website)

On that taxable income you will pay PRSI of either 4% of taxable income or €500 whichever is greater.

You will also pay usc. This is paid at 0.5% on the first 12k (odd) of taxable income and then 2% on the next 7k (odd), and after that it’s 4.25% up to about 60k (?).

Your prsi and usc are entirely yours and your wife has her own.

The income tax you pay will be determined by your taxable income and your wife’s taxable income. Broadly speaking you can each earn up to about 36,000 (odd) each at 20%. However, if one or other of you don’t reach the 36,000 limit you can transfer the unused amount from one spouse to another, but the amount you can transfer is capped at 9,000 (odd).

So if you each earn 36,000, your combined 72,000 is taxed at 20% and everything above that is taxed at 40%.

But if, say you have a taxable income of, say 15k, and your wife has a taxable income of 50k then you have 21k “spare” at 20% level, and you can transfer 9,000 of this to your wife. So your tax is as follows

You: 15,000 x 20% =. 3,000 (Your 15k)
Wife. 9,000 x 20%. =. 1,800. (9k transferred from you to Mrs)
Wife. 36,000 x 20%. =. 7,200. (Her 36k @ 20%)
Wife. 5,000 x 40%. =. 2,000. (Excess at 40%)

Total. 65,000. =. 14,000

Less Credits

Personal you. 1,630
Personal wife. 1,630
PAYE wife. 1,630
Earned income you. 1,350. (This figure may need to be checked)

Total credits. (6,240)

Net tax payable. 7,760