Self employed for 1st time - tax q

I'm about to start consulting and will be self employed fo the next 2 years at least if all goes well. Can someone point me in the right direction for taxation of self employed persons and what is tax deductible?

I presume the usual business tuff - phone bills, broadband, petrol (can you pay yourself civil service mileage rates if you don't deduct petrol?)..andy tax breaks (PRSI for example) and any benefits of registering a company car in your company?

This is new territory for me so if someone can point me in the right direction I should be able to find my way...

Thanks!

Z

From the PRSI persepective, see here

You mention being self-employed, and also using a company.
These are two separate situations.

I would suggest that you get an accountant or tax advisor to see whether you should be self-employed or Incorporate in the first instance. They can then advise you of the expense implications of each scenario.

Thanks for the replies...I should have clarified - I haven't decided whether to act as a sole trader or as a limited company as yet - may have to operate a company and get prof indemnity cover etc.

Domo - I am an accountant (!) - but I'm not an experienced tax accountant (as most accountants aren't) - I would be careful about advice to get an 'accountant' to do taxes - people should really be careful to choose someone who has plenty of experience in calculating income taxes and processing returns if they are going to pay for this advice.

However, from my point of view I'm capable of doing my own taxes and calculations etc but as I haven't done income tax calculations since my college days (a long long time ago!) I just need someone to point me in the right direction so I can decide what is tax deductible etc and maximise my take home pay...been in the PAYE bubble for too long ;-)

Z

Have you looked at www.revenue.ie?

OK, get you, but I am a tax consultant, and I find that if I suggest people go to a tax consultant (only) for advice, I upset the accountants............. so I therefore suggest both.........

Some tax consultants are not accounts experts, and some accountants are not tax experts, but some are good at both.........

My preference is for you to go to a tax consultant in this instance!!

I think it would be helpful if you gave more detail - what you are going to do (accountancy?), who will be your clients, your level of income, where you will be based (at home?). It is really only with more detailed info that you can get a meaningful answer to your questions.

Thanks Domo - I'm hoping I can get better at tax accounting (if only for myself!) in the next few months - filed my first Form 12 this year - big step for me ;-)

Anyhoo - I'm doing interim management - hoping to clear +100K p.a. - will be working with companies on their premises mostly and invoicing them for an hourly or daily rate.

I'm thinking that phone, petrol to and fro clients, home office minor costs and broadband etc should be tax deductible...but don't want to miss out on anything obvious that might benefit me or indeed sting me in the tail later down the line...

I've checked the Revenue stuff but it's all very piecemeal so I'm looking for a central repository of info that I can use to bring myself up to date on this self employment lark...

Thanks again!

OK, then a few pointers -

As you will be working for companies, I would assume that their insurance will cover you, and you don't need any indemnity cover - not usually necessary unless you are giving "advice" that you could be sued for. Therefore Incorporation is not necessarily the best choice doe to the increased costs and administration of dealing with a Ltd company. But - there are exceptions to this and you should really get professional advice in this regard.

As long as you are working ad-hoc for several companies you should not be considered to be an employee - is this a possibility? Otherwise, the Revenue might consider you an employee anyway - but the risk for this is with the companies (generally) and not you.


Usual expenses for this type of self- employment (not Incorporation):

Use of home as office - having part of a room (not a whole room, which could give rise to CGT on sale of premises), claim running costs as a % of the whole house - mortgage interest, heating, lighting (will be minimal I would assume), but you need to keep full records. This can be a pain, and in some cases not worth doing - worth considering though.

Use of computer - depreciation fo same, and costs, paper, ink, etc for bookkeeping and invoices as a % of total use. Revenue are unlikely to accept 100% business use.

Phone - better to have a separate line or mobile for this due to dual purpose potential of home phone line.

Travel - as a self-employed person, use of car has to be calculated on overall basis - depreciation of cost, petrol, insurance, NCT, repairs, petrol- claiming % used for business, and you will need to keep a log of total and business mileage for Revenue - rates per mile as laid down by Revenue may only be used by employees.

Accountancy fees

Off the top of my head I can't think of any other costs you could incur, but you will know best if there are any other expenses to be considered.

If you are intent on doing all of this yourself, I would suggest you take professional advice for the first year, and then carry on yourself in the same vein. However, if there would be any change in circumstances, income, costs etc, it would be best to get full advice.

Hope this helps

Thanks Domo - that's great info...I'll look into the professional advice for definite and continue on myself after Year 1.

If it takes off I might look at incorporation if only to use the pension tax breaks for proprietary directors...as I understand it I could put 20% of my income into a pension scheme tand this scheme/trust could use the funds to purchase property...the proceeds of which (rental income or CGT) are not subject to tax....have I got the jist of it right?

Not sure what happens to the trust if you only do it for 2 years and then go back to being an employee - would you have to sell the property then...I don't see how you could continue to pay for the property if you weren't having any income in the company...

Food for thought...
Z