Tax implications of self-employment

[Mortimer]

I've been unemployed since Feb 2013. I received Jobseekers for 9 months but was not awarded JSA as my wife's salary was deemed too high.

At the moment, she earns around 47k basic and about 5k bonus. She obviously has all my tax credits.

I've been offered an opportunity to do some freelance marketing for a company from home. I'd roughly take home 1500 euro per month for the hours intended. I would also have an opportunity to pick up other bits and pieces from smaller clients, maybe another 500 euro per month.

What are my options? If i take it do I:

-set myself up as a sole trader?
-will it be worthwhile with tax implications?e.g. will half of my earnings be gone in tax?
-what can I write off against tax for working from home? I will be working from home office and using laptop, broadband, electricity etc.
-I read about a 2 year exemption from income tax for people who become self-employed before the end of 2016. However, you must be unemployed for at least 12 months (I am) and in receipt of social welfare assistance for same (impossible as the period was 9 months for JSB). We do, however, receive around 20 euro per week in FIS.

Any advice would be greatly accepted? Taking the role would entail paying childminders and there may not be a point if half of any income is gone in tax.

 

[DB74]

As things stand, you can only transfer €9,000 of your 20% band to your wife which still leaves €24,800 of unused 20% band which only you can use. So if you were to earn €2,000 per month then this €24,000 earnings would be taxed at 20% PAYE. In addition, you would have to pay USC & PRSI so it would work out at roughly 30% total tax rate

Re expenses, you can offset whatever expenses are required to produce that income, so if you are genuinely working from home then you can offset a portion of household bills against that income, once you are somewhat realistic about it.

Have a look at Example 5 on Revenue's page about the Start Your Own Business Relief as this may apply to you

http://www.revenue.ie/en/tax/it/reliefs/own-business-scheme/index.html#section2

 

[Mortimer]

As things stand, you can only transfer €9,000 of your 20% band to your wife which still leaves €24,800 of unused 20% band which only you can use. So if you were to earn €2,000 per month then this €24,000 earnings would be taxed at 20% PAYE. In addition, you would have to pay USC & PRSI so it would work out at roughly 30% total tax rate

Re expenses, you can offset whatever expenses are required to produce that income, so if you are genuinely working from home then you can offset a portion of household bills against that income, once you are somewhat realistic about it.

Have a look at Example 5 on Revenue's page about the Start Your Own Business Relief as this may apply to you

http://www.revenue.ie/en/tax/it/reliefs/own-business-scheme/index.html#section2

Thanks. Two questions though:

1. Does that Start Your Own Business Relief scheme mean that I would not be paying 20% PAYE for two years, only USC & PRSI
2. As I said in OP "I read about a 2 year exemption from income tax for people who become self-employed before the end of 2016. However, you must be unemployed for at least 12 months (I am) and in receipt of social welfare assistance for same (impossible as the period was 9 months for JSB). We do, however, receive around 20 euro per week in FIS."

I was only entitled to JSB for 9 months then it was stopped due to means testing. I didn't bother signing on for credits since as felt there was no point with no social welfare assistance. Does this disqualify me from scheme?

 

[DB74]

1. Does that Start Your Own Business Relief scheme mean that I would not be paying 20% PAYE for two years, only USC & PRSI

Yes that is correct

2. As I said in OP "I read about a 2 year exemption from income tax for people who become self-employed before the end of 2016. However, you must be unemployed for at least 12 months (I am) and in receipt of social welfare assistance for same (impossible as the period was 9 months for JSB). We do, however, receive around 20 euro per week in FIS."

I was only entitled to JSB for 9 months then it was stopped due to means testing. I didn't bother signing on for credits since as felt there was no point with no social welfare assistance. Does this disqualify me from scheme?

Going on the Revenue example then you would not be entitled to the Relief but I can't give you a definitive answer on that sorry

 

[epicaricacy]

My understanding is that the relief you're referring to is dependent on being accepted on the 'Back to Work Enterprise Allowance'. The qualifying periods (minimum 1 year) are detailed on welfare.ie

FIS is not mentioned on the website and signing on for credits is not considered eligible re. a qualifying period.

I'd ring the schemes section in your local welfare office.

 

[Monbretia]

You should have signed for credits anyway to keep up your contributions towards contributory pension, enquire about starting doing it now if the rest doesn't pan out, if you leave it too long you can't get back on that system.

 

[danash]

I was in a similar situation but went on the 'Short term enterprise allowance' - similar to the Back to Work enterprise allowance but you can take it up during your nine months JB rather than after a year. It is not as lucrative as the BTWEA as it only lasts as long as your JB

In any case to qualify it is the same process...your case officer will refer you to a third party agency that will assist you with the paperwork and you have to produce a business plan on their template indicating revenues and expenses etc. It was not onerous but you do have to tick the boxes to qualify. It is designed to show that there is a solid chance of a real job being created. You may have a difficulty if you have left a gap and while you will not receive a payment as it is means tested it does provide for exemptions to profits and income taxes for up to two years or I think 40K.

Give your case officer a call. I was made redundant in January and am coming off the scheme soon and will then start paying myself from the income of my new company.