Tax liability for Sole Trader also working as PAYE employee

N

never2late

Guest
First question - I am working as a PAYE employee and am also in the process of setting up as a Sole Trader but I don't expect to make any profit for the first year or two as it will be a part time venture. I read in the Revenue Guide - Starting in Business, page 13 that if your business makes a loss, it can be set off against other taxable income or carried forward to offset against future business profits. I am interpreting that to mean that I can use it to reduce my tax liability in my PAYE job (other taxable income). Is this correct or have I get the wrong end of the stick here?
Second question - I am paying PRSI in my day job. Will I also have to pay PRSI in my business as a Sole Trader?
 
You can only carry forward losses against future sole trader income, not PAYE income. Yes, you have to pay PRSI (and health levy) on sole trader income.
 
I suspected that might be the case, otherwise it would be too good to be true!
Thanks for your help!
 
If you make a loss in your sole trader business you can indeed use that to claim back Paye overpaid. Complete a Form 11 after the year end, when you have your accounts worked out. The earlier you send it in the earlier you will get your refund.

You will have to pay PRSI on self-employed income, but if you are making a loss, you won't have any such.
 

If you make a loss in a sole trader business, could the loss be offset against your spouse's PAYE income assuming you were jointly assessed?
 
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