How to Set Up as a Sole Trader

If you’ve always dreamed of owning and running your own business, you have a number of options available to you including setting up as a limited company or registering as a sole trader. In this article, we focus on how to set up as a sole trader in Ireland. A sole trader is the simplest legal structure for a business in Ireland and it also has a very straight forward registration process.

To register as a sole trader in Ireland, you will need to take the following steps:

1. Register for Income Tax by completing Form TR1

The first thing you need to do is complete a Form TR1 and submit it to your local tax office. Basically, a Form TR1 allows you to register for taxes, including Income Tax, VAT and Employers PAYE. As a sole trader, you will need to file an income tax return and pay your liabilities before 31 October each year.
Simply put, income tax is a tax on the profit made by your business. But it’s important to remember that even if you made a loss or your business had minimal trading, you must submit an income tax.

2. Register for VAT (if applicable)
In general, if your business supplies goods over €75,000 per year or services over €37,500, you are obliged to register for VAT. But there are a number of exceptions such as taxis and crèches who do not charge VAT.

VAT returns contain details of the VAT on your sales and the VAT on your purchases as well as details of goods bought from and sold to other EU countries. If you have more sales than purchases, then you will pay the difference to Revenue.

If you have no experience in VAT, it can become a little overwhelming. If you are running a restaurant, making purchases or supplies to other countries, are involved in e-commerce or are unsure about what VAT rate to charge, it may be best to seek professional advice.

Also, an annual VAT Return of Trading Details return must be filed each year.

3. Register for Employers PAYE (if applicable)

If you are going to have employees, you will have to register as an employer. You will be responsible for deducting the appropriate PAYE tax, Universal Social Charge and PRSI from your employees’ wages as well as filing regular returns throughout the year.

Every time you want to pay your employees, you need to first send a payroll file to Revenue with details of their salaries and taxes. Revenue will send you a monthly statement of how much payroll taxes you owe them based on these uploaded files. Payments to Revenue are made every month or every quarter depending on the size of the business.

Operating payroll for your business can be time consuming and confusing. You will need to invest in some payroll software to make things easier. But if you have no experience in processing payroll, we advise you to attend a payroll course or hire a professional to process your payroll – it can prevent a lot of costly mistakes in the long run.

4. Register for ROS on www.ROS.ie

Don’t forget, businesses are now required to register for ROS and must complete their returns online. The Revenue Online Service (ROS) allows you to file and pay your income tax, VAT and Employers PAYE returns securely online. There are a lot of advantages to using ROS such as extended deadlines and instantaneous notification of receipt of returns.

5. Register Your Business Name

If you trade under a business name, you will also need to register this business name with the CRO. You can do this online at www.core.ie by registering as a user and filling out the business name registration form. This is in addition to filing Form TR1 to register for taxes.

If you are thinking of setting up your dream business or have any questions about getting things started, please call us today on 021 240 9120.

Updated 26/03/19 for PAYE Modernisation

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17 thoughts on “How to Set Up as a Sole Trader

  1. Irene Wall Reply

    Morning applying for a job on etender do I have to have set up a company to apply?

    • Orla Linehan Post authorReply

      Sole traders can register as suppliers on the etenders website.

      You will also need to check the particular requirements of the work you are tendering for.

      All the best,

      Orla

  2. Bart Reply

    Hi, I received my certificate from CRO, then registered for Income Tax on Revenue online. After 3 days I was allowed to register to ROS which I did. For now, I have my RB Cert for Business, I have added Income Tax on Revenue Online and I register to ROS. What else should I do? How to add incomes and outcomes? Should I do anything else? I work full time for one company and additionally, I provide consultancy services.

    • Orla Linehan Post authorReply

      Hi Bart,

      Thanks for your comment.

      It would be a good idea to make an appointment with a local accountant, who can guide you through the next steps and help you set up a good bookkeeping system. In my experience, it is better to get everything set up properly from the start, rather than waiting until your tax return needs to be done before hiring an accountant.

      All the best,

      Orla

  3. Sami Reply

    Hi Orla

    What is TCSPs ? for instance, if you help someone to form a company in Ireland and charged a consultancy fee ? Do you need to have TCSPs authorisation ?

  4. Mark Reply

    Hi Orla

    A couple of questions if I may.

    1. As a married man with the sole income for my household, my tax credits are currently at 3300. If I set up as a sole trader, I believe I can get a maximum of 1650 tax credit. If I set up now before the end of he year, will that mean I am liable to pay more tax for this year.

    2. Similarly, if I leave my job to start my business, but don’t actually do much trading this year, would the tax refund I would be due for overpaying in the first half of this year be affected?

    Any response would be greatly appreciated.

    Mark

    • Orla Linehan Post authorReply

      Hi Mark,

      Thanks for your comment.

      As an employee, you are entitled to the married credit of €3,300 plus the employee tax credit of €1,650.

      If you were to become self-employed, you will still get the married credit of €3,300 plus the earned income credit of €1,350 instead of the employee tax credit.

      In a year where you were both self-employed and employed, you will get a maximum credit of €1,650, depending on the amount of employment income you have.

      If you become self-employed, any tax overpayment in the first half of the year can be set against your tax on your sole trade income. If there is any left over, it can be returned to you or set against future taxes.

      The above is just general information, so I would need to look at your individual circumstances to give you tailored advice.

      Note that as a self employed person you will be under Class S PRSI. https://fidelia.ie/class-a-v-class/

      You should also check if you are entitled to any other credits, such as the home carer credit, relief for medical expenses etc. (More information here: https://fidelia.ie/claim-your-credits/)

      Best regards,

      Orla

  5. Mark Reply

    Hi Orla

    Thanks for the quick and very informative response. In short, my wife and I have a combined income of almost 34k to date this year, (21k for me, 13k for her) and have paid roughly 3300 in PAYE (1600 for me and 1700 for her). As I’m the higher wage earner in the household, we have the 3300 tax credit assigned to my revenue account.

    I am considering a different line of work in which I would be required to set up as a sole trader and invoice for my work plus VAT.

    My wife would remain unemployed as she has been since July but intends to seek new employment in the new year (Alternatively, she could also work with me but would that necessitate setting up a partnership?)

    Assuming I don’t work again for the rest of the year, I think we would be due a sizeable portion of that PAYE payment back.

    So effectively, what I want to know is if setting up as a sole trader now and beginning to trade before the end of the year (even if the income of which is less than 5k for example), would mean that we would lose 1650 of the credit on our PAYE payments, and if we would still be likely to claim tax back if the 1650 is not lost.

    I hope that this is somewhat understandable.

    Thanks again for your time

    Mark

  6. Karol Buszkiewicz Reply

    Hi there,
    I am working part time and want to start as s sole trader at the same time. What should I be registering for?

    • Orla Linehan Post authorReply

      Hi Karol,

      The main taxes you would need to register for are income tax, VAT (if you exceed the thresholds as outlined above), employers PAYE (if you will have employees).

      If you trade under a business name, you will also need to register this business name with the CRO.

      We would need to review your situation to see if there are any further tax registrations required. For example, if you are in the building trade, you may need to register for RCT etc.

      The very best of luck with your new business.

      All the best,

      Orla

  7. Siobhan Reply

    Hi Orla,
    Very helpful article, thank you!

    I’m Irish and have been living and working in the UK for 15 years. My husband and I are moving back to Ireland this year. I will continue to work for the UK company remotely and my husband, a painter, will set up as a sole trader. My question therefore is two fold;

    Without a Company entity in Ireland to hire me, I will continue to be hired through the UK, paid into an Irish bank account. I will have an NT tax code in the UK. What will I need to do in order to work and pay taxes correctly in Ireland?

    My husband will be setting up as a sole trader. I don’t believe this will exceed the thresholds you outlined above for VAT registration. Does he need to do anything initially or can he simply complete a self assessment annually paying any outstanding taxes?

  8. Jane Reply

    Hi Orla,

    Great article for sole traders, just a few questions.
    I’m hoping to set up a shop online selling small goods internationally.

    1. Do I need to account for Irish VAT straight away, or only when i reach the goods threshold/or is it the distance selling threshold of €35,000 – or do I charge VAT automatically to all online goods, even domestic purchases?
    I’m aware of the EU VAT thresholds selling to individual countries and when I would need to register for them, but don’t think I will reach that turnover in one year.

    2. Also, is there a timescale on when I have to register as a sole trader? Do you get a few months?

    3. It’s more of a side business and I don’t anticipate a huge profit this year. Can I just include any additional Income under 5K under my taxes this year, instead of registering as a sole trader or for VAT?

    Thanks,
    Jane

    • Orla Linehan Post authorReply

      Hi Jane,

      Thanks for your comment and your kind words about the blog.

      1. VAT can be very tricky, so it is difficult to give an answer based on the information provided. If you will be selling internationally online, we would recommend seeking advice from an accountant who specialises in this area. If you are buying/selling internationally, there can also be customs duty when buying/selling goods from outside the EU.

      2. and 3. See here for Revenue’s guidelines on who should register for income tax self-assessment. https://www.revenue.ie/en/self-assessment-and-self-employment/guide-to-self-assessment/who-should-register-for-income-tax-self-assessment.aspx

      According to these guidelines: “You do not need to register for self-assessment if your taxable non-PAYE income does not exceed €5,000 and your gross non-PAYE income does not exceed €30,000. That income must be coded for PAYE purposes. ’Coded’ means the income is taken into account in calculating your tax credits and standard rate cut-off point for PAYE purposes. In this case, you must submit a Form 12 online through PAYE Services in myAccount.”

      If you think you will be required to register for income tax self-assessment, you should register as soon as (or just before) you start trading.

      All the best,

      Orla

  9. Eleanor Reply

    Hi Orla,
    Very helpful article!
    I am hoping to set up an online clothing company importing goods from outside of the EU. I am aware of the customs/duty etc for the goods coming into the country however, as the business will only be small starting off do I need to register for Vat and charge vat from the get go on the goods?

    Many thanks
    Eleanor

    • Orla Linehan Post authorReply

      Hi Eleanor,

      Thanks for your comment.

      We recommend seeking advice from an accountant or tax consultant who specialises in this area. It can get quite complicated. There are lots of factors to consider including whether you need to register for VAT, paying VAT on importing the goods, selling online within the EU, distance selling rules etc. Getting advice at the start can save a lot of expense down the road.

      The very best of luck with your new business venture.

      With kind regards,

      Orla

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