Tax for self-employed part-time worker

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apple_tree

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I am primarily a stay-at-home mom but have the opportunity to work as a freelance/self-employed copywriter to earn some extra money. My husband is a PAYE worker and the main breadwinner, earning approx. EUR 36K annually. When I stopped working a few years back, I transferred my tax credits to him.
I expect to earn approx. EUR 7,000 this year (at best). My question is: What tax can I expect to pay? I've called revenue and they explained to me that I need to complete form TR1 and state that I want my husband to remain the assessible spouse, register him for income tax and then submit my tax returns at year end. They also told me that, with the sum I mentioned, that I should end up paying little or no tax. Is this correct? Can I trust what one person at revenue told me or do I need to ring again to verify? My husband and I have no other income apart from his salary and this additional money I hope to earn. I also understand that I can submit details of any costs I have incurred through my business or work to offset against any tax I am due to pay.
Thanks!
 
You will pay tax at roughly 26% rate of what your net profit is

The 26% is calculated as

PAYE 20%
PRSI 4%
USC 2%

so at €5,000 net profit, your tax will be €1,300

You have no tax credits which you can use because you are not entitled to the PAYE credit (because you are self-employed) and your husband already has the married tax credit

On very important thing you need to bear in mind is that you will lose the Home Carers Credit if your net profit is greater than €6,700. This tax credit is worth €810 to you every tax year. If your income is less than €5,080 then you can keep the tax credit in full. If your income is between those limits then you will receive a portion of the credit.

so if your net profit is €7,000, this will push the (effective) tax payable up to €2,630, calculated as

PAYE @ 20% = €1,400
PRSI @ 4% = €280
USC @ 2% = €140

Total tax payable = €1,820 PLUS you will lose the HCC of €810 which pushes the figure up to €2,630 which is an effective tax rate of 37.57%

http://www.revenue.ie/en/tax/it/leaflets/it66.html
 
DB74 has summed it up pretty succinctly there, but I just want to point out one other thing to you.

If you were to earn an equivalent amount of money as an employee under PAYE, you would not be paying any tax unless you earned €8,250, just the USC (and the potential loss of Home Carers Credit).

It may not be a matter of choice, but you would certainly be substantially better off financially if you were earning €5k under PAYE than self employed.
 
Are there tax credits for self-employed person

Firstly, thanks for your responses. They answer my questions. I have some new questions now though based on your responses:
- I was not aware of a Home Carer's Credit. Do I need to apply/register for this or do I get it automatically? I am not too worried about the limit I would need to earn to lose this as I am not likely to have a net profit exceeding the amount specified
- Does a self-employed person get tax credits? Or is it a case that my husband retains the tax credits (I think financially, we will be better off if he does) even if I am self-employed?
- I cannot be a PAYE earner as I would need one employer for that I presume. This is not the case, I do work for a few customers one of whom is not based in Ireland.
- My customer in Germany is asking me for something that sounds like a tax ID/VAT ID on an invoice I have sent. I have checked with revenue and they tell me the only number I have or need in my circumstances is my PPS number, which my German customer's finance dept. does not accept. By pursuing the TR1 route and registering for income tax, am I given some other tax ID?
 
apple_tree said:
I was not aware of a Home Carer's Credit. Do I need to apply/register for this or do I get it automatically? I am not too worried about the limit I would need to earn to lose this as I am not likely to have a net profit exceeding the amount specified
Click to expand...

DB74's link (http://www.revenue.ie/en/tax/it/leaflets/it66.html) outlines the Home Carers Tax Credit.

Yes you may need to apply for it, best to just ring the tax office again and ask them if you have been given it, and if not what they need from you. If you haven't been claiming it, you can have it applied for the last 4 years, which could generate a tax refund for ye...

apple_tree said:
Does a self-employed person get tax credits? Or is it a case that my husband retains the tax credits (I think financially, we will be better off if he does) even if I am self-employed?
Click to expand...

No, a self employed person doesn't get any additional personal tax credit. You have a tax credit of €1650 in 2011, and your OP suggests that this has been transferred to your husband so he pays less PAYE in his job. (If you were to take up a PAYE job you would get an additional €1650 tax credit (PAYE allowance), but not if you are self employed.)

apple_tree said:
My customer in Germany is asking me for something that sounds like a tax ID/VAT ID on an invoice I have sent. I have checked with revenue and they tell me the only number I have or need in my circumstances is my PPS number, which my German customer's finance dept. does not accept. By pursuing the TR1 route and registering for income tax, am I given some other tax ID?
Click to expand...

No, you won't get a different tax number if/when you register - your Income Tax number will be your PPSN. I would imagine that the problem the German co.'s finance dept. is having is that they are plugging your number into an EU database to confirm the number you are giving them is a valid EU VAT number, which it isn't (and cannot / will not be) because you aren't a VAT registered business. There are rules for how they should then account for your supply of services to them, which they may not be used to applying if most of their suppliers are VAT registered. They just need to figure out how to do it, it's not your problem really!
 
Thanks so much for the quick reply and all the useful information. Will get back on the tax office and my contact in Germany.
 
Can I include childcare costs in expenses

For the purposes of self-assessment, can I include childcare expenses. I have one child in creche for two half days per week, costin Eur 46 per week. WIll this be something I can include in my expenses, or part of it. I mean I would estimate that I get to work maybe 1/2 or 1/3 of the hours he is in care (when the other is asleep!). Also what sort of household expenses: I am thinking obviously electricity, Internet, telephone, heating etc for winter months. A friend has told me, that for the heating/electricity, you assign of a portion of your costs for the area you work in, not all obviously. Should I also divide it according to time spent working. I mean I guess, I work 25%/33% of my time, when I have work. Does anybody have any guidelines on this as it seems complex to assess.
Also, if the case arose, will my paying PAYE/PRSI entitle me to paid maternity leave down the line? Just wondering.
On some of the other posts, I have seen mention of Capital Gains Tax if you assign certain household costs to your expenses and wish to sell your house later. DOes this apply in every case or can anybody clarify?
 
Childcare expenses not allowed, at all, EVER!

Rough estimate of household expenses allowable, provided it's reasonable

I'm not 100% on the CGT but I don't think it's an issue if all you are doing is claiming a portion of your household bills. It would be different if you built an extension as an office and claimed for the cost of the build etc.
 
OK, see what you are saying about the CGT. Cannot understand why childcare expenses would not be allowed but so be it. I presume that I can allocate a portion of my mortgage payments too then.
 
I wouldn't allocate a portion of mortgage payments. That could have CGT implications.
 
Childcare expenses are not allowed for paye workers either ---

Dont allocate any of your mortgage repayments either.
 
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