Sole Trader: can I invest my income before taxes hit me?

As a sole trader if you spend money on gear (ie investing) then that's money you don't have as income. So no income tax on it.

With a LTD company you just don't pay out all your income as salary, leaving some money in company. You can get hit for corp tax on this company profit tho, and an additional service company charge if you fall under certain criteria. You really should look more closely at your "low tax rate" assumption.

It is a difficult question as a Ltd. Co. involves not just tax implications but Companies Registration Office (CRO) requirements.

Small companies do not have to have an annnual audit done provided they have annual accounts prepared and submitted with the Annual Return to the CRO before the submission deadline, normally within 9 months of the accounting year end. However, if the deadline is missed then the audit exemption is lost for 2 years and this can be expensive as audited accounts will be more expensive to prepare than unaudited accounts and there are fines for missing the deadline.

On the tax front, a Ltd. company commencing business is relieved from Corporation Tax (CT) liability on its profits for the first 3 years where the liability would be €40,000 or less, with some relief if between €40,000 and €60,000. If €60,000 or over then the tax is payable. There are some excluded companies but generally the above applies.

A sole trader is liable from the start and, except for a complication in the first couple of years, the tax (including PRSI and Universal Social Charge - USC) is generally payable in one amount in October. I will not go into details about the complication but it has to do with the timing of
payments on account, called Preliminary Tax, for the first 2 years .

I do not quite understand what you mean by reinvesting money in the company. Any profits made and cash held as a consequence, belong to the company so it is not yours to play with. You can take out money from the company, the most common ways being by Directors remuneration or dividends, but it will be taxable in your hands. If you just leave the money in the company there are no tax implications for you but the obvious question then is what are you going to live on. You will probably have to withdraw money from the company as indicated and pay tax on it. Taking the money as a loan will not work either as there are tax implication there also.

Depending on your personal circumstances and other income (spouse?) then the sole trader route might be the best to start with and you can always form a Ltd. Co. at a later stage, although if a company takes over the trade after a period the 3-year relief for CT does not apply.

If you qualify for the reduction to "Nil" for CT then there is no payment due. It is not a deferral so it will not be payable later. The tax is calculated as it would be normally and then it is reduced to "Nil" if below the €40,000 limit - equivalent to €320,000 profits @ 12.5%.