Starting up as sole trader

wildflower

Hi, I am in the process of setting up as a sole trader as a massage therapist. I just needed to ask a few questions. I met an accountant already but they are unsure of the tax implications for me as I am also in full time employment- they will get back to me in a few days. Just want to know should my next step be to go to revenue to set up, or do I set up a bank account. Someone else told me to go to taxassist.ie because they do a free initial consultation.
I have my premises and my client base already- I'm taking over from someone else.
Also I earn 60k now, hoping to make 25k from this new business every year. Will I be on higher tax band or lower? Maybe it's not that cut and dry but any advice would be great. Thanks

JayTech.ie

You need a new accountant by the sounds of it!

I'm no expert but here's what I understand so far.

Your net profits from your business plus any PAYE earnings are used to calculate your total annual income for the year. Assuming the 25k from the business is net profit then your total earnings would be 85k. The income threshold for a single person is 32,800, and 65,800 for a married couple so depending on your marital status and partner earnings, some or most of your income would be taxed at the higher rate.

You will also be paying the higher rate of USC (7%) and of course PRSI (4%).

Also if the revenue (sales) of your business is above 37,500 you will need to register and collect VAT.

You need a good accountant to look at ways of reducing your tax bill through allowances and credits,

Oh and welcome to the wonderful world of the self employed!

Best of luck!

Jason

lakill Farm

Hi, i just dropped you a PM.

The best thing you can do is delete the contact information for the last accountant. Just my advice.

wildflower

Hi guys, sorry I should have clarified that the accountant is a friend and she doesn't work in this area- she is just doing me a favour and will check out what I need now. Should I go to revenue next or to tax assist, to be honest I have no start up fund so paying an accountant is a last resort, at least until I'm guaranteed I get the tender for this job. But if its my only option I will have to bite the bullet. My accountant friend led me to believe I wudnt really need an accountant this yr, she just said keep good records of income and expenditure, lodge cash to bank and keep the tax separate, then I will be ready to file tax returns next yr and pay an accountant then. Is this right or shud I be investing in an accountant from day one?

dbran

Hi Wildflower

First you need to figure out if it is worth your while carrying out this business in terms of cost, expected profit and additional tax payable.

Once you are satisfied that this is worthwhile then you should register as self employed using form TR1.

As your friend mentioned to you before, keep good records of all of you income and expenditure etc. You will not need to pay an accountant until you need to submit your tax return which will be every October.

So if you are setting up in business today you should not really need to visit an accountant until October 2014 provided you are happy to maintain all the books and records yourself.

Hope this helps

dbran

wildflower

Thanks dbran, I just printed the TR1 form so will send that off tomor. I have little or no set up costs as the company provide everything. Even at 40% tax my profits are good enough to warrant doing it, I have little or no expenses every month as I work in the same place so no travelling or anything. I think I can clear 18k per year after tax, on top of my wages, minus minimal expenses every month.

dbran

Dont forget the PRSI (4%) and USC (7%).

wildflower

Is that on top of the 41% tax- so it would be 52%- that's a lot!!! Wasn't expecting that :-(