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

Hi

I put this thread in the personal tax subforum as well - but someone who frequents this business subforum might be able to help...


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.

Your final suggestion of chatting to the tax office is not bad; I have always found them helpful. Did you register for income tax with the Revenue? Form TR1.
Should you be Vat registered? It is worth talking to someone in Revenue.

The Revenue website was revamped a while ago, now it is very difficult to find the answer to a specific question.

You are entitled to the whole PAYE tax credit in 2008, although you were self-employed for part of the year. The PAYE tax credit of 1830 at 20% allows you to earn Paye income of up €9150 tax free. If your Paye earnings are less than this, your Paye tax credit is capped at the level of Paye earnings. You can't offset unused Paye tax credit against non-Paye income.

A sole trader just gets the personal tax credit. He benefits in other ways e.g an employee cannot get tax relief for car expenses driving to work, but a sole trader can claim his business travel expenses against his income. He may claim some portion of ESB costs as a business expense, if he has an office in the house.

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?

Click to expand...

Pretty much. I would take off the tax credits before setting off the tax you have paid, but it's the same result.
Good luck.

Thats great thanks.

Yes, have registered for income tax with TR1 and am VAT registered.

Am quite clear now on my position.

Thanks