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Whatever the question is ask it! Whether it is a tax question, a question about us or the process – we are here to help. Just click on a question below and your answer will display. Or if your question isn’t here, fill out the form below.
I am now Self Employment. What action should I take?
Call Tax Buddy of course! You need to register with Revenue as Self Employed by completing a TR1. You may need to also register for Vat – read next question and answer!
Is it true I don’t have to pay tax for the first two years being Self Employed?
Yes – a tax relief up to €40,000 per annum for the first 2 years, the catch is you must have been unemployed for 12 months or more. The relief is only available for those who set up a new business during the period from 25th October 2013 to 31st December 2018.
What do I pay tax on being self employed?
You pay tax on the profit you make each year. The tax you pay is PAYE, PRSI and UCS.
What is Fixed Assets?
A Fixed Asset is something you will gain the use of the item for more than one year – for example a car or van, manufacturing or production equipment, office furniture, computers. You will have paid for the item, but the cost is spread over the life of the asset. The cost is allowed over 8 tax years for 12.5% per year.
How do you calculate Profit for a tax year?
It is easier to process your books of account using an accounting software. We offer Xero which is a cloud based system or any of the Sage products which are PC based. Once you enter your sales, your costs/expenses, and process your bank transactions to capture costs that you may not receive an invoice for (i.e. bank charges, insurance direct debit etc.) you then have a basic profit and loss account
What happens if I do not pay my tax on time?
You will be charged interest on late payment to the value of 10% of the income tax due for the year. Even if you part paid your income tax but could not manage to pay the full liability, you will still be charged 10% of the TOTAL tax due. It is in your best interest to get your tax return completed early so you have several months to get the tax due together – alternatively, if you are due a refund then you can claim it earlier and have the benefit of that money!
What are the USC (Universal Social Charge) rates?
For 2018 (which is the tax year you will be submitting in 2019)
0.5% on the first €12,012
2% on the next €7,360
4.75% on the next €50,672
8% on the balance
For 2017 (tax return will be submitted in 2018)
0.5% on the first €12,012
2.5% on the next €6,760
5% on the next €51,272
8% on the balance
When working from home how do I claim for Light and Heat?
A reasonable amount or percentage only is claimed as a business expense having regard to the nature of the business.
What is PAYE?
PAYE (Pay As You Earn) is tax deducted from your salary/pension by either employers or pension providers.
Is there any business expense I cannot claim as a tax deduction?
Yes. The most common non-tax allowable business expenses are entertainment costs. This can be a tricky one and needs to be carefully considered if entertainment costs are a significant part of your business expenses.
Can I claim for the cost of meals for myself as owner of the business?
Not unless you are doing so when you are away on business. You may claim subsistence for non-vouched meals if you are out of your place of business for more than 5 hours.
I am just starting in business. Should I trade in my own name or through a limited company?
Limited companies involve more regulation but very often potential customers want to deal with a company rather than a sole trader. Trading in your own name is simpler for accounting and tax purposes – you are still required to submit a tax return and you pay tax on your profits. Sole Traders can register to employ other people just the same as a limited company. It is very much dependent on the size / turnover of the business. If you are setting up a very small business I would recommend sole trader, if larger than limited company.
Are Vat returns hard to complete?
Vat returns can get a little complicated – you need to make sure you charge the correct vat rate to customers and that depends on your industry and whether you supply goods or services. Tourism for example charges a Vat rate on sales of 9%, bread is 0%, building services is 13.5% and so on. You then deduct the VAT charged to you by your suppliers. We are keen to help – this is what we do, and we usually do it better and faster than you can, so it is cost effective to outsource this work.
I cannot emphasis enough how important it is to stay on top of PAYE and VAT returns and payments. They can build up very quickly and can be costly in terms of penalties, interest and a possible audit. Most clients want to be compliant and want to spend time concentrating on their business not worrying about TAX bills.
Can I employ family members in my business?
Yes. Spouses, children, siblings and relatives in general can all be employed by you. They are registered as employees and pay tax just like other employees.
Can I allocate surplus credits and standard rate cut-off bands to my spouse?
Under joint assessment up to €9,000 of standard rate cut-off and €1,650 in personal credits can be transferred to a spouse.
I’m a proprietary director; am I entitled to the PAYE credit?
Proprietary directors (directors owning more than 15% of the company) are not entitled to the PAYE credit in respect of salary from their own company.
Do I pay PAYE if I have a medical card?
Yes if you have PAYE source income.
What are exemption limits?
Exemption limits apply for age 65 and over. If your PAYE income is less than the exemption limit and you obtain an exemption certificate from Revenue then PAYE will not be deducted from your income. The income limit for 2018 is €18,000 for a single person and €36,000 for a married couple.
Do I pay PRSI if I have a medical card?
Yes as long as you are under 66.
Does PAYE apply to maternity benefits paid by the Department of Social Protection?
Yes from the 1st July 2013. Prior to this Maternity benefit was tax free.
Is children’s allowance subject to tax?
Is PAYE payable on a gift voucher I received from work valued at €500?
No provided that the value does not exceed €500 per annum.
What does being taxed on a normal or cumulative basis mean?
This means that tax credits and the standard rate cut-off point are accumulated each week – so if a person did not work for a week, then the following week they would benefit from 2 weeks tax credits. The total earnings to the year so far are assessed for tax, and the total tax credits and total standard rate cut-off point are also assessed for the year so far.
What is BIK?
BIK (Benefit-In-Kind) refers to additional benefits received by an employee. These benefits can be cars, free or subsidised accommodation, company loans or medical insurance. The employee must pay PAYE, PRSI and USC on these benefits as they are a source of income.
Is the provision of travel passes for bus, train or Luas taxable as BIK?
No. These are not classed as BIK and are not subject to PAYE. There are some rules which apply.
Is the provision of bicycles or bicycle safety equipment taxable as BIK?
No. not subject to PAYE but has a cost ceiling of €1,000 in any five year period. The Cycle to Work scheme or Bike to work scheme involves the employer paying for the bike up front and you making repayments before taxation – this means that your gross pay is reduced and this is then reflected on a lower PAYE, PRSI and USC charges.
I have received dividends in addition to my PAYE income. How do I declare them?
You will be required to submit an income tax return. The Form 12 is used, however we can help and submit your return for you.
I have rental income in addition to my PAYE income. How do I declare it to the Revenue?
You will be required to submit an income tax return. The Form 12 is used, however we can help and submit your return for you. You must calculate the profit made on the investment property so taking into consideration the rental income less the mortgage interest and any other costs associated with the property. Other costs can be apartment block maintenance, insurance, property tax, repairs, fixed items (such as furniture and fittings). It sounds quite complicated and can be a little, but we are here to help.
When should I register for Vat?
If your sales for a service will exceed €37,500 in 12 months you must register for VAT. If you sell a product then the limit is €75,000. Call us to help with registration.
Being Self Employ, should I register as an employer?
If you want to employ staff you need to register as an employer.
What Expenses can I include in the business?
All reasonable expenses that are wholly and exclusively spent on business activity. Examples of expenses that are allowable – rent, costs associated with travel for business, utility costs, advertising your business, wages if you employ staff and so on.
What are Drawings?
This is what you pay yourself out of the business. You do not pay tax on Drawings but have to tell the Revenue how much they are so that the Revenue can see you have enough drawings to live on.
How do I pay my tax?
I am assuming you mean Income Tax and not Corporation Tax. Once a year every October under the Self-Assessment tax rules you pay any tax owed to Revenue Commissioners for the previous calendar year. You can also pay on-line and extend the payment date to 19th November. Tax Buddy is here to help, this is what we do day after day for clients. We remove the stress for you.
Do I have to pay PRSI and if so how much?
Yes, you pay PRSI on your profit as part of your tax payment if you are self-employed. PRSI is at a rate of 4% and is known as Class S. If you are a PAYE worker you will pay PRSI on your earnings once you earn over €352 per week.
I work from home. Can I claim my mortgage as a business expense?
You could claim part of your mortgage interest as an expense based on the amount of space used in your house as an office. However, you could be reducing the benefit of the capital gains tax exemption for your private home so this matter needs to be carefully considered.
I rent an apartment and run my business from it. Can I claim the rent as a business expense?
Yes, based on how much of the apartment is used for business e.g. using 25% of the apartment as an office then claim 25% of the rent as an expense.
What is a Form P60?
A P60 is an annual statement of the amount of PAYE, PRSI, USC and property tax deducted by an employer or your pension provider if you are retired. It also includes details of the gross pay for USC purposes and the amount of USC deducted.
What is a Form P45?
A P45 is given to an employee when they leave employment and it contains the amounts of PAYE and PRSI deducted for that particular year along with USC details. It also shows the amount earned for the year including any previous employments.
Can I claim for travelling abroad to trade shows, meeting existing or potential customers etc.?
Yes, you can claim the full costs once you can proof it is for business. If you extent your visit, you must reduce your claim for the ‘holiday’ portion.
Can I reduce last year’s tax bill by making a pension contribution?
Yes if you make the payment and claim for the tax relief by the 31st October in the following year.
How do I know what amount I should pay as a pension payment?
It depends on your age and income – touch base (01-2573838) and we can give you a quick guide over the ‘phone.
How often do you have to make Vat returns?
There are a number of different Vat periods- i.e. Bi-monthly- Jan/Feb, March/April etc. 4 monthly, 6 monthly and annually. The bi-monthly option is the most common one. If the business is very small Revenue often allocate a 6 monthly return.
If you pay your VAT to revenue by direct debit then you maybe in a position to file an annual return. If we look after your taxes we then calculate the variance between actual VAT owed and VAT paid by standing order – this means you always know when to increase or decrease the standing order to come in line with business levels.
What is a certificate of tax credits?
A certificate of tax credits is a certificate that is received annually from the Revenue Commissioners outlining an employee’s tax credits and income taxable at 20%.
What is the PAYE credit?
A PAYE credit is a special tax credit that employees are entitled to. For tax years 2017 & 2018 it is worth €1,650.
Do I still deduct PAYE from a salary I receive from my own company?
Yes PAYE must still be deducted from your salary even if you own the company which is paying you.
Am I entitled to an age credit?
You are entitled to the age credit if you are aged 65 or over in the tax year. For tax years 2015 to 2017 it is worth €245 for a single person and €490 for a married couple.
What’s my PRSI class?
Most employees pay Class A. Directors / Shareholders pay Class S.
Is social welfare taxed?
It depends on the type of social welfare payments you are in receipt of, please contact us for further guidance.
Is state pension and employment pension taxable?
Unfortunately both are taxable!
Is statutory redundancy subject to tax?
What does being taxed on an emergency basis mean?
If an employee does not provide an employer with a PPS number, a P45 or a certificate of tax credits then that employee will be subject to PAYE on the emergency basis. The employee’s total salary will be taxed at 20% for the first four weeks and thereafter at a rate of 40%.
What does being taxed on a week 1/month 1 basis mean?
Where an employee is taxed on a week 1/month 1 basis each pay period is looked at in isolation and pay accumulated from the beginning of the tax year has no bearing on the calculation of PAYE to be deducted. This is often used where an employee has multiple employments or where Revenue want to evaluate historical information.
I didn’t earn enough wages to pay any taxes; can I still make a claim for medical expenses incurred?
No – you can only claim against tax paid, if you did not pay tax (PAYE), then you cannot claim. If you did not earn enough to pay any taxes, you may be entitled to a medical card – check it out!
What are AVCs and do they affect the level of PAYE I pay?
AVCs are additional voluntary contributions made to occupational pension schemes. A rebate of PAYE can be claimed from the Revenue Commissioners for these payments.
Can fixed monthly pension PRSA payments be used to reduce the amount of PAYE deducted from my salary?
Yes. If you contact your local Revenue office, they can be added to your certificate of tax credits.
Send us your question and we’ll try to answer it as soon as we can.