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Taxation for sole trader and PAYE

  • 20-09-2020 12:49pm
    #1
    larbakium
    Registered Users Posts: 83 ✭✭


    Trying to understand how should I file taxes for a person that has main income from PAYE (full-time employment), and on the side just started an online business. Does it need to be through ROS FORM 11?
    If yes, does FORM11 treats all income equally, or there is a split between PAYE and the sole trader activity?

    e.g. PAYE income has tax deducted at sources throughout the year, so the income is being taxed as per PAYE.
    e.g. expenses incurred into the activity are considered the cost. I suppose these should only be considered against any income from the sole trader activity (invoiced) and not look at as hole against PAYE income?


    He registered as a sole trader at the start of the year but has not started activity (meaning any sales) just yet.

    When I am reading revenue.ie looking for direction, the only references I find to sole traders are on how to register a business. From a taxation point of view, sole traders are treated as Self-employed. Is this correct?

    Think Ill end up ringing Revenue on monday, but just wanted to get a head start.

    thanks
    Tagged:


Comments

  • #2
    relax carry on
    Registered Users Posts: 4,072 ✭✭✭relax carry on


    larbakium wrote: »
    Trying to understand how should I file taxes for a person that has main income from PAYE (full-time employment), and on the side just started an online business. Does it need to be through ROS FORM 11?
    If yes, does FORM11 treats all income equally, or there is a split between PAYE and the sole trader activity?

    e.g. PAYE income has tax deducted at sources throughout the year, so the income is being taxed as per PAYE.
    e.g. expenses incurred into the activity are considered the cost. I suppose these should only be considered against any income from the sole trader activity (invoiced) and not look at as hole against PAYE income?


    He registered as a sole trader at the start of the year but has not started activity (meaning any sales) just yet.

    When I am reading revenue.ie looking for direction, the only references I find to sole traders are on how to register a business. From a taxation point of view, sole traders are treated as Self-employed. Is this correct?

    Think Ill end up ringing Revenue on monday, but just wanted to get a head start.

    thanks

    It's a form 11 filed next year if he registered for income tax in 2020. The form should include all sources of taxable income for 2020 including the PAYE income. There's a section for your PAYE income and and separate section for the self employed income. Whatever your nett taxable income is from the self employed source will be added to your PAYE income in computing what tax you need to pay. You'll be given a credit for any taxes already paid through the PAYE system so you aren't double taxed.

    https://www.revenue.ie/en/self-assessment-and-self-employment/filing-your-tax-return/index.aspx


  • #3
    larbakium
    Registered Users Posts: 83 ✭✭larbakium


    relax carry on wrote: »
    It's a form 11 filed next year if he registered for income tax in 2020. The form should include all sources of taxable income for 2020 including the PAYE income. There's a section for your PAYE income and and separate section for the self employed income. Whatever your nett taxable income is from the self employed source will be added to your PAYE income in computing what tax you need to pay. You'll be given a credit for any taxes already paid through the PAYE system so you aren't double taxed.

    https://www.revenue.ie/en/self-assessment-and-self-employment/filing-your-tax-return/index.aspx

    So costs that were taken in the year and are related to the business activity would be in this specific section of the self-employment?
    What about private health costs?

    So if I would do this with pen/paper...the calcs behind would look like this?
    Section PAYE= income - credits = net taxable income
    Section Self-employed= income-cost =net taxable income
    Sum both net taxable incomes and apply standard taxation (PAYE%, USC, PRSI)?

    OR

    Section for PAYE has its own final tax calculation (PAYE, USC, PRSI) and in seperate the Self-employment has its own tax calculation?

    Reason why i am asking is if opt 1 is more logic to me, but how would you look at benefits in kind from PAYE? (sorry if i am mixng the obvious here)...


  • #4
    Stratvs
    Registered Users Posts: 958 ✭✭✭Stratvs


    Think of it like this, Start by putting all the existing PAYE income (which will include bik taxed through the employer) onto the return then add in any unreimbursed medical expenses and any other items which my give rise to a tax credit. The net tax position at this point is either a plus minus or balanced.

    Then you add in the self-employed income which will be after any allowable costs ( there are guides on revenue.ie ). The tax, PRSI & usc position now will reflect that additional net income.

    There will only be one final computation on the return but you can work out for your own information what relates to the PAYE and what relates to the self-employment.

    You can use the form 11 in the ROS offline application to do this and see what the results are before and after the inclusion of the self-employed income.


  • #5
    larbakium
    Registered Users Posts: 83 ✭✭larbakium


    Hi,
    I see and understand. thank you for sharing your thoughts.


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