For some of Ireland’s self-employed workers, a scare before bedtime is the norm in the run-up to the annual tax season. Usually the dread sets in around late August, with September a combination of panic and digging through boxes of receipts to get affairs in order for Revenue’s pay-and-file deadline later this month, or mid-November if filing online.
It’s not that people are shirking their responsibilities, rather it is the gut-wrenching fear of filing a clerical error and being landed with an unexpected bill that makes the lead into the annual tax season full of dread and gloom.
So, what you do to make the self-assessment tax process less of a chore?
Forosophobia and filing
Firstly, for some the struggle is real and there’s even a name for it among Americans: forosophobia.
Yes, really. It is a recognised fear of taxes and the IRS, the US equivalent of Revenue. Similar to other phobias, it can cause symptoms such as sweating, shortness of breath and intense anxiety.
Indeed, a survey published last week from FastTax.ie found that more than half of Irish taxpayers felt the fear in the run-up to filing their taxes. Of the 1,000 respondents to the research, conducted by iReach Insights, the phrase “tax returns” itself was enough to invoke stress and anxiety in 53 per cent of them.
While some reported feeling organised or confident in the run-up to the deadline, the dominant emotions were apprehension and dread. But it doesn’t have to be, so grab that shoebox of receipts and follow this helpful guide to get your Form 11 ready.
Know your obligations
Separating emotions from your financial obligations is key to getting organised. The reasons you might enjoy being self-employed can range from a better work/life balance like choosing your own hours and clients to avoiding daily commutes or office politics.
And if you choose to work like this or enjoy having a trade and being your own boss, you have an obligation to collate and keep a record of your income and expenditure, and ensure this information is shared with Revenue by October 31st, or November 19th, if paying online.
But there’s more: if you are a landlord, make money as an Airbnb host, double-job as an influencer, have inherited money, own shares, or make any extra cash from a nixer, you must declare and file by these deadlines, too.
According to Revenue’s 2024 annual report, some 899,221 people were categorised for Self-Assessment Income Tax Registration. That’s out of a working population of about 2.8 million.
Learn the lingo
If you’ve ever logged on to ROS, the Revenue Online Service, you know how formal and serious the whole affair can be.
Remember the survey mentioned earlier? Well, nearly 40 per cent of respondents said “fear of making innocent mistakes that could be costly” is their biggest worry when filing taxes. This is closely followed by 31 per cent who liken the experience to “being overwhelmed or confused”.
Yet it’s an essential document to know your way around for non-PAYE and PAYE workers with additional income.
You are considered a chargeable person if, in addition to PAYE income, you have earned either more than €5,000 tax-accessible income – money outside of your employer – or earned more than €30,000 gross non-PAYE income.
Even with this, someone who is considered not a chargeable person will still need to declare any income outside of PAYE earnings to Revenue, just not via Form 11.
The 44-page document appears weighty at first glance, but understanding what applies to you and how you fill this will speed up the process. Have your PPS number to hand and a clear list of your income, either from sales or otherwise, expenses pertinent to the business, or any losses incurred. Even if you’ve earned nothing in that year, you must still file the form.
Credit where it’s due
Don’t forget to use tax credits because it will help reduce your bill. The earned income tax credit is valid for most self-employed people and is worth €1,875 for 2024. If you are in rental accommodation, the value of the rent tax credit for 2024 and 2025 is €1,000 for an individual, or €2,000 for jointly assessed married couples or civil partners.
Employees are allowed to claim 30 per cent in tax relief back on electricity, heating and broadband when working remotely. Likewise, self-employed people can submit deductions that include lighting, heating, phone, broadband and home insurance.
It pays to have a pension
A pension is a no-brainer for the self-employed, but the problem is often sourcing a lump sum when it comes to the annual tax return. It is very much advisable to do this if you can, and better still, get into the habit of paying regular contributions because it will reduce a tax bill significantly.
Why?
Because a self-employed person who pays tax at 40 per cent and who makes a pension contribution of €10,000 will then reduce their overall tax bill by €4,000. Most Irish workers can contribute 15-40 per cent of their income to a pension, and that income will not be subject to income tax, but percentages are age-dependent, so someone under 30 can avail of an income tax-free contribution of 15 per cent while a person aged 60 or over qualifies for 40 per cent.
If still in doubt ...
Employ a tax agent. Sometimes it is the easiest option if nerves and a fear of tripping up and enduring the wrath of Revenue stifles you. Because it can and it does, even when others try to tell you it’s a very easy online filing system. A tax agent will cost you, however, especially if you keep that professional on to handle your tax affairs year round. Don’t be surprised if their annual billing comes in at about €800-€1,200. But it is money well spent if you manage a good night’s sleep in the knowledge that your affairs are in order.
On that note, make sure you kept abreast of their filings and dealings with Revenue, too. It has been known for slip-ups to incur while others are supposed to be keeping watch, and when this happens, the late penalties or worse, a sheriff’s letter, will fall on your shoulders, not your agent’s.
You can contact us at OnTheMoney@irishtimes.com with personal finance questions you would like to see us address. If you missed last week’s newsletter, you can read it here
