Ten most frequently asked questions about Self Employment
Q. I have started Self Employment. What do I have to do about tax?
A. You must register as a Self Employed person with the Revenue by completing Form TR1, available on the revenue website.
Q. Do I have to register for Vat?
A. The Form TR1 covers Vat registration as well.
Q. Should I register as an employer?
A. Only if you are going to take on employees and if so, the same form TR1 deals with this as well.
Q. What do I pay tax on?
A. You pay tax on your profit for the tax year.
Q. How is Profit calculated?
A. In broad terms it means Turnover- (Ongoing Expenses + Annual Fixed Assets Claim) = Profit
Q. What is Turnover?
A. Turnover is the total of your sales invoices for the year adjusted for work-in-progress (WIP) and opening/closing stock values. Special rules apply for valuing WIP and stocks.
Q. What does Ongoing Expenses mean?
A. This means all the ongoing costs that you incur in running your business on a daily basis e.g. rents for business premises, phone bills, motor expenses, employee salaries, insurance etc.
Q. What does Annual Fixed Assets claim mean?
A. If you buy a fixed asset e.g. a car, computers e.g. large cost items of enduring benefit. This is a Fixed Asset for tax purposes and the cost is allowed over 8 tax years e.g. a claim of 12.5% per annum for 8 years.
Q. What are Drawings?
A. 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.