This guide explains what expenses you can claim and how to use tax credits to save money. It also includes simple calculations to show how these savings work.
The basic rule: “Wholly and Exclusively”
When claiming expenses, the most important rule is that they must be wholly and exclusively for business purposes. This means the expense should directly relate to your business and not have any personal use. For example, you can claim the cost of a printer used only for work but not a family vacation.
If an expense is partly for personal use, you can only claim the business portion. For example, if you use your car for both work and personal trips, you can claim only the percentage of costs related to work.
Common allowable expenses
Here are some common expenses that self employed Ireland can claim. Each includes an example to show how it works:
Advertising Costs
If you spend money on promoting your business, like online ads or flyers, you can claim this as an expense.
Example: You spend €2,000 on a social media campaign. This €2,000 reduces your taxable income.
Office Supplies
Items like pens, paper, and printer ink are deductible if used for work.
Example: You buy office supplies worth €300. This €300 is deductible.
Software Costs
Subscriptions or licenses for software used in your business can be claimed.
Example: You pay €50 per month for accounting software, totaling €600 annually. This amount is deductible.
Rent
If you rent office space, the full rent is deductible.
Example: You rent an office for €1,000 per month, totaling €12,000 annually. This reduces your taxable income by €12,000.
Business Insurance
Insurance premiums for protecting your business are deductible.
Example: You pay €800 annually for professional indemnity insurance. This amount is deductible.
Wages Paid to Employees
Salaries paid to employees (but not yourself) are deductible expenses.
Example: You hire an assistant and pay them €30,000 per year. This reduces your taxable income by €30,000.
Subcontractor Costs
Payments made to freelancers or subcontractors are deductible if they help with your business directly.
Example: You hire a web designer for €5,000 to create a website for your business. This amount is deductible.
Bank Charges and Loan Interest
Fees from your business bank account or interest on loans are deductible.
Example: You pay €200 in bank charges and €500 in loan interest annually. Together, these reduce your taxable income by €700.
Accountancy Fees
Fees paid to an accountant for preparing tax returns are deductible.
Example: You pay an accountant €1,500 annually for tax advice and filing services. This amount is deductible.
Home Office Expenses
If you work from home, you can claim a portion of household costs like electricity or heating based on how much space you use for work.
Example 1: Your home office takes up 10% of your house area, and your annual electricity bill is €2,000. You can deduct 10% of this bill (€200).
Example 2: Instead of actual costs, you could claim a fixed daily rate set by Revenue.
Motor Expenses
If you use your car for work-related travel, you can claim either mileage or a percentage of actual costs.
Example 1 (Mileage): You drive 5,000 kilometers for work in a year at a rate of €0.50 per kilometer. You can deduct €2,500 (5,000 km × €0.50).
Example 2 (Actual Costs): Your total car expenses (fuel, insurance) are €5,000 annually, and 60% of this is for work use. You can deduct €3,000 (€5,000 × 60%).
Capital Allowances
For big purchases like computers or machinery that last more than one year, you can claim capital allowances over time.
Example: You buy a computer for €2,000 and claim 12.5% annually as capital allowances (€250 per year for eight years).
Tax credits: Additional ways to save
In addition to claiming expenses, self employed Ireland can benefit from tax credits:
1. Earned Income Tax Credit: Reduces your tax bill by up to €1,875 annually.
2. Mortgage Interest Tax Credit: Homeowners can deduct up to €1,250 annually on increased mortgage interest.
3. Rent Credit: Tenants can claim up to €750 annually (€1,500 for couples).
4. Medical Expenses Relief: Claim back 20% of unreimbursed medical costs like doctor visits or prescription medicines.
5. Pension Contributions: Contributions to pensions are tax-deductible at up to 40%, depending on your income bracket.
Example calculation: Tax savings
Let’s see how claiming expenses reduces taxes:
– Gross Income: €50,000
– Total Allowable Expenses: €10,000
– Taxable Income: €40,000 (€50,000 – €10,000)
If taxed at 20%, the tax owed would be:
– Without Expenses: €50,000 × 20% = €10,000
– With Expenses: €40,000 × 20% = €8,000
By claiming expenses worth €10,000, this person saves €2,000 in taxes.
Record keeping: A must
To claim these deductions successfully:
– Keep all receipts and invoices.
– Use spreadsheets or accounting software to track expenses.
– Maintain detailed logs (e.g., mileage logs for car use).
Good records make filing taxes easier and help avoid issues with Revenue audits.
Filing taxes as self-employed
Self employed Ireland individuals file their taxes using Form 11 through Revenue’s Online Service (ROS). Here’s what you’ll need:
1. Calculate total income earned during the year.
2. List all allowable expenses.
3. Enter both figures into Form 11.
The system will calculate the total tax owed after considering deductions and credits.
Seek professional help
Tax rules can be complex and change often. Hiring an accountant or tax advisor ensures you’re claiming everything you’re entitled to while staying compliant with Irish tax laws.
Final thoughts
Being self-employed / freelancers Ireland comes with responsibilities but also opportunities to save on taxes legally through allowable expenses and credits. By understanding the rules and keeping accurate records, self-employed individuals in Ireland can significantly reduce their tax bills while focusing on growing their businesses.
This was all about the “Self employed Ireland? Here’s how to claim expenses & reduce taxes”. For more such information/outsourcing services reach out to us at info@outbookstech.com or call us at +44 330 057 8597, Ireland.
Parul is a dedicated writer and expert in the accounting industry, known for her insightful and well researched content. Her writing covers a wide range of topics, including tax regulations, financial reporting standards, and best practices for compliance. She is committed to producing content that not only informs but also empowers readers to make informed decisions.
