As a self-employed trade professional, you pay tax on any profits you make from your business. This means that you must be registered as a self-employed person with revenue and file an annual tax return.
The deadline for filing a self-assessment tax return is fast approaching and if you make a late payment on any taxes owing – you will be charged interest from the due date to the date when your payment is received.
When is the 2020 self-assessment tax deadline due?
The deadline for filing and paying Preliminary Tax (estimate of tax due for the current trading year) is 31st of October, however, if you file your tax return online, the deadline is around mid-November.
If you file a paper Form 11 your deadline is the 31st of October, however, when you file with ROS you can also benefit from a tax deadline extension – which can be a real help for busy trade professionals!
Registering with ROS also means you can view and manage your taxes with Irish Revenue Commissioners as well as calculate your taxes automatically based on your online self-assessment.
What is Preliminary Tax?
Income taxes are paid for the previous year’s earnings. For example, in 2021 you will file to pay for taxes earned in 2020.
Preliminary Tax (PT) is an advance payment for the following year’s tax. So, you’ll need to have enough cash to pay your tax as well as PT which could be calculated as:
- 90% of the tax owed for 2021
- 100% of the tax due for 2020
- 105% of the tax owned for 2019
If you think you are going to have a problem with paying PT, then contact revenue as soon as possible to arrange for a Phased Payment Arrangement.
How can I reduce my tax bill?
As a self-employed professional you need to make sure you keep business expenses separate from personal expenses and have all invoices and bank statements ready for filing.
An easy way to reduce your tax bill is to ensure all your business expenses are recorded and evidence kept (i.e. receipts). As a rule, if an expense is for your trade, then it will be tax-deductible such as:
- Protective clothing like hard hats and steel toe-cap boots.
- Business mobile phone expenses (remember that only the calls that relate to your business will be allowed)
- Car expense including petrol, tax, insurance, repairs etc. (self-employed people cannot claim mileage)
- Any tools and equipment used specifically for the running of the business may be reclaimable.
Covid-19 tax relief for self-employed Trade Pros
For self-employed trade professionals whose business was profitable in 2019, but who incurred or expects to incur a loss in 2020 due to Covid-19 restrictions, you can claim those losses and unused capital allowances of up to €25,000.
This is a temporary income tax relief for self-employed trade professionals. Claims and interim claims can be made by amending the Form 11 tax return for 2019. To make an interim claim you must be fully tax compliant.
TIP: Revenue has provided this guide on how to apply for loss relief for self-employed individuals adversely affected by Covid-19 restrictions and helpful illustrations. On page 7 there is a small building contractor example which may be applicable to you.
Is there any special self-employed tax exemption?
Yes, as a self-employed trade professional, you can claim Earned Income Credits (EIC). Your income minus expenses counts as net earned income for the Earned Income Credit, but the amount of credit you can get also depends on your level of income.
For 2021, you may claim an Earned Income Tax Credit of €1,650. This amount also applies for 2020 (in 2019 the amount was €1,350). However, if you also qualify for the Employee Tax Credit (formerly known as the PAYE tax credit), the total value of these 2 tax credits cannot exceed €1,650.
The exemption does not cover PRSI or USC payments.
I got the pandemic unemployment payment, how much tax will I pay?
If you received the pandemic unemployment payment (PUP) at any point in 2020, then tax liabilities for PUP are handled in the usual way by completing your self-assessed tax return.
To determine what tax is owned, you will need to declare any additional income and claim any additional tax credits.
If you received PUP in 2021 then the PUP was taxed in real-time and means that in most cases, there will be no additional tax liability at the end of 2021.
Beware of late filing charges
If you forget to submit your self-assessment before the deadline, then beware of late filing surcharges which will be added to your tax. Surcharges within two months within two months of the filing date: 5% of your tax due, up to €12,695 or over two months: 10% of your tax, up to €63,485.
Who can help me with my tax return?
A guide to completing self-assessment returns can be found here and a list of Revenue helplines available and current opening hours can be found here.
Revenue public offices are closed but if you need a face-to-face meeting you can contact Revenue on 01 738 3660 to make a virtual appointment (for a video call). Queries can also be sent through Revenue myEnquiries.
Alternatively, you can reach out to an accountant who can act on your behalf with Revenue and complete the necessary declaration to implement a payment arrangement.