Combined PAYE and sole trader - q about tax credits and PRSI

Hi,

In 2008 I was an employee, and paid the reqd PRSI. Then I became a sole trader for the last 3 months of the year (and have saved the expected amounts of income tax and PRSI).

How do the tax credits as a PAYE employee work? Do I get the full amount of 1830 (Employee Tax Credit) + 1830 (Single person), even though I wasn't a PAYE employee for the entire year? Does a sole trader get any tax credits (I can't find anything regarding tax credits for sole traders on the net)?

How does the tax and PRSI work when there is a combined income like mine? Should I total up my income from the entire year, calculate the tax and PRSI due, and then take off the tax and PRSI already paid, and then take off the tax credits, leaving x amount to be paid now?

I am a foreigner, and struggle with the revenue.ie website - it seems so vague, and the search functions are crap. Tax credits and PRSI are a new concept to me too - so please take it easy on me!

Perhaps I should call the tax office and discuss with them?

Ta in advance.

603304529 said:

Hi,

How do the tax credits as a PAYE employee work? Do I get the full amount of 1830 (Employee Tax Credit) + 1830 (Single person), even though I wasn't a PAYE employee for the entire year? Does a sole trader get any tax credits (I can't find anything regarding tax credits for sole traders on the net)?

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If you earned more than €10k (ish) as a PAYE worker (i.e. enough to use your grossed up PAYE credit), then you get the full 1830 for the year. You also get the single person 1830 for the year (you don't get an additional allowance for sole trader work but, if you were only a sole trader in 2009, you still get this 1830 (or whatever it is for 2009) credit, but not the PAYE credit).

603304529 said:

How does the tax and PRSI work when there is a combined income like mine? Should I total up my income from the entire year, calculate the tax and PRSI due, and then take off the tax and PRSI already paid, and then take off the tax credits, leaving x amount to be paid now?

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You may need to register as a sole trader (form TR1) or else you may be able to fill in your sole trader income into your Form 12 (you should check with Revenue on this - they tend to push people towards the form 11). There will be a separate box for each type of income and you will pay a different rate of PRSI/Health Levy on your sole trader income. Treat the two separately for calculation purposes but your PAYE PRSI should need no work as you'll have paid it through your employment.

603304529 said:

Perhaps I should call the tax office and discuss with them?

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They are certainly very helpful in my experience and a call to them would be a good idea in any case. If you do have to register as a sole trader, then register for ROS (Revenue On Line) as then that does all your calculations for you. Even if you don't register for ROS, get your tax return in early so that Revenue can assess it before the payment date - they'll double check your figures for you and issue you with a statement of what's owed when October 09 comes around.

The guide relating to filling out a form 12 is also very helpful. It's long, but does explain things well.

Watersprite, you're a legend. Thats a great help.

I shall also call the revenue office - but think I have most of it sorted now.