Overview: tax and PRSI

If you are self-employed you need to be aware of certain money matters. This document deals with some of these. Other sections of this website deal with financial issues and supports when you are setting up a business and when you may be having problems.

In this document, as on the rest of this website, the main emphasis is on sole traders. If your business is incorporated as a company, then it is liable for corporation tax.

How do I officially become self-employed?

First, check whether or not you actually are self-employed. Some people who are mainly working on contract for one company or employer may be regarded as employees by the Department of Social Protection or Revenue.

The tax and social insurance system treats you very differently depending on whether you are employed or self-employed. Find out more about checking your employment status.

If you are self-employed, you must register with Revenue as a sole trader for tax purposes.

Do I have to pay PRSI?

As a self-employed person, you pay Class S PRSI (Pay Related Social Insurance) on your income. These contributions help you to qualify for a limited range of social welfare payments, such as State Pension (Contributory).

If you are no longer self-employed, or your income falls below a certain level, you can choose to make voluntary contributions. These help you to qualify for social welfare benefits. You can make voluntary contributions even if you are getting a social welfare payment, such as Jobseeker's Allowance.

What do I have to do as a sole trader?

You must make an annual return of your income and pay income tax, PRSI and the Universal Social Charge (USC). Your income is your gross income from the business, less expenses. You are also entitled to the usual range of tax credits and reliefs against your tax liability.

You must also charge VAT (Value-Added Tax) if you are registered. You do not need to register for VAT if your turnover is below certain limits.

You need to keep certain records in order to have information for your tax return, and Revenue requires you to keep these records for 6 years.