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Taxation of sole trader income above employed income

  • 21-11-2020 12:05pm
    #1
    lawred2
    Registered Users, Registered Users 2 Posts: 24,463 ✭✭✭✭


    Hi,

    Just need some feedback as to whether I've got this right or not..

    So I'm employed and paying the marginal rate..

    I also have a sole trader income... Let's say 20k after legitimate expenses (a round figure) above my employed income.

    Is this following approach legit?

    So my income tax bill on that 20k should be 8k or so... Can I take that 8k and seek to put it into my occupational pension and seek relief for the full amount? I won't be breaching the 20% limit.

    Obviously I'll still need to pay the relevant USC and PRSI.

    Is that a legit means of dealing with my tax liability?


Comments

  • #2
    Bobby1984
    Registered Users, Registered Users 2 Posts: 268 ✭✭Bobby1984


    Your tax bill on €20K will be €10K (give or take, assuming you are in the high tax bracket) which includes Paye, Prsi and USC. You would need to put €20K into a pension in order to get tax relief at 40% to offset against the €8K Paye liability. You will also need to pay €2K USC/PRSI to Revenue and you would need to pay preliminary tax as well.

    You will also need to pay an accountant to prepare a Form 11 as you are over the €5K limit for a Form 12. You would also want to keep an eye on the thresholds for vat registration as this would mean additional bookkeeping/accounting fees (assuming you didn't have the necessary skills to prepare these returns).

    You would need to have income of €100K or more in order to get tax relief at 20% in order for you to be able to put €20K in a pension.


  • #3
    lawred2
    Registered Users, Registered Users 2 Posts: 24,463 ✭✭✭✭lawred2


    Do I really need an accountant for a sole trader return? I didn't think it was an explicit requirement


  • #4
    Pawwed Rig
    Moderators, Category Moderators, Home & Garden Moderators, Recreation & Hobbies Moderators Posts: 22,407 CMod ✭✭✭✭Pawwed Rig


    lawred2 wrote: »
    Do I really need an accountant for a sole trader return? I didn't think it was an explicit requirement

    It is not a requirement. A tax advisor however might save you more than they will cost depending on how proficient you are.


  • #5
    lawred2
    Registered Users, Registered Users 2 Posts: 24,463 ✭✭✭✭lawred2


    that is true


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