Freelance Tax Question

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quarterback

Registered User
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Hi
I'm currently employed full time as a graphic designer. I've also started this year taking on small freelance projects to supplement my income.

I can expect to earn maximum of about 1000 euro a month from this extra work.

My question is, I have no idea where to start to be tax compliant. What's the best way for me to pay tax on this income?

Any advice would be greatly appreciated!

Thanks.
 
If you're talking about potentially €12,000 pa then you need to register for self-assessed Income Tax. Form TR1 @ www.revenue.ie is used for this.

You will be allowed deduct all legitimate expenses wholly and exclusively incurred in the course of the freelance work against the income so you should keep accurate records of income and expenses.
 
Thanks for that Graham.

Just out of interest, what would be considered a legitimate expense? Hardware purchases? Mobile phone bills etc?
 
Legit expenses would be phone and travel expenses that are for the freelance only. Hardware would be considered a capital purchase, unless you were buying it to resell it on again. If you really have no idea what you are doing then I would deinitely get an accountant
 
It might be worthwhile to do one of the Enterprise boards "start your own business' course. They do a section on taxes etc, where you can ask any questions.
 
Don't worry Quarterback, it's not that complicated.
Basically, your freelance income will just be taxed as extra income. Your taxes on your main job income are all looked after for you, but you will need to settle up with the tax man each October/November for the tax owed on your freelance income.

The tax rates are the same, so if you are paying any tax at the higher rate in your job at the moment, all your freelance income will be taxed at the higher rate. You'll also need to pay 3% PRSI on the freelance income, and more than likely 2% health levy. So that could be 46% of every freelance euro earned gone - worth remembering before you sacrifice too much of your free time!

As others have said you can claim expenses, which reduce the income you pay tax on. But I'm in a similar line myself (except completely self employed) and there are not many expenses at all really. For more permanent items like a computer, these are treated as capital purchases, so you have to claim the expense evenly over 8 years - so it's of limited benefit - especially if you only pay tax at the standard rate!

Best of luck with your endeavours. Working full time and doing freelance gigs can be pretty full on, so try not to let it take over too much! :) But the good news is that while you're still an employee too, you get much better tax credits and PRSI benefits - I won't start on that hobby horse :p Good luck.

PS there is a good booklet available from the Revenue IT48 starting a business here: [broken link removed]
 
Excellent advice Fizzy, thanks so much.

46% = Ouch.

Ultimately I want to work for myself fulltime, so I'm steadily building up some strong clients and relationships, so I don't mind the extra work this year, long term goal is worth it, plus when you're this busy you kind of tune out from all the doom & gloom news..

Will definitly start to budget for 46% level of tax from this month and will also talk to an accountant and look at all that information on starting a business.

Thanks everyone!
 
Best of luck with everything Quarterback.
Building up clients before you go out on your own is definitely the best way to do things if you can handle it, so you're starting off the right way!

One caveat to bear in mind when you go fully self employed is that you will lose the PAYE tax credit, currently 1830 i.e. you will pay up to 1830 more tax each year than an employee earning the exact same income as you - probably a bit less than this as you can offset expenses, but you will still be getting screwed for being outside the PAYE comfort zone.

But despite the discrimination, there are lots of great things about working for yourself too. After being out on my own for over 2 years now, I would find it *very* hard to go back to being an employee! Good luck :)
 
You should register the trade on a Form TR1. you are under the VAT threshold so you need not register for this. if it looked likely that you were going to exceed 37,500 you must VAT register.
You must file a Form 11 return and pay liabilities by 31/10 of the succeeding year.
You need not pay preliminary tax for the first year of trading
You will also pay PRSI at 5% on the freelance earnings. You should factor these matters into your pricing
 
hey guys,
follow up question, so i got myself an accountant and registered with revenue.

i'm still full time employed and plan to stay that way for the next year or so as i continue to build up clients.

it's going well but earnings are very low, on average 8k turnover over the last 12 months, hard to take on too much with the fulltime job.

question is, if i happened to be made redundant from the fulltime job, would i be entitled to claim any social welfare seeing as i am now declared to revenue? obviously initially having to rely on my freelance work to pay the bills wouldn't work in the short term..

thanks!
 
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