Tax as a Sole Trader in Ireland – Part 3: Preparing Your Tax Return, Preliminary Tax & Records

Preparing Your Annual Income Tax Return

As a sole trader, you must file a Form 11 each year under Revenue’s self-assessment system. This is how you report your business income, claim expenses, and pay any tax owed.

You’re responsible for:

• Reporting your total income: This includes your business profits and any additional income (e.g. rental income, dividends, or PAYE if you also work part-time).
• Calculating your taxable profit: That’s your business income minus allowable business expenses.
• Working out your Income Tax, Universal Social Charge (USC), and PRSI.

You can submit your return using Revenue’s ROS (Revenue Online Service) if you're registered, or myAccount if you're not. Most sole traders file online using ROS because it gives you an extended deadline (usually mid-November), while paper filings must be submitted by 31 October.

Key Components of the Form 11

• Part A: General personal details and income overview
• Part B: Full breakdown of income sources and deductions
• Part C: Calculation of tax liability, tax already paid, and any balance due

Once the form is submitted, you either:

• Pay any balance owed by the same deadline, or
• Receive confirmation that you’ve overpaid and are due a refund.

Understanding and Calculating Preliminary Tax

Preliminary Tax is a payment towards next year’s tax liability, and it's required under the self-assessment system. You must pay it on or before 31 October each year, even though your final tax bill won’t be confirmed until the following year.

Revenue allows you to calculate Preliminary Tax using one of three methods:

Option 1: 100% of your prior year’s tax liability

This is the most common and straightforward method.
If your 2024 tax liability was €5,000, you simply pay that amount as Preliminary Tax for 2025.

Option 2: 90% of your estimated current year liability

This allows you to pay less upfront if you expect lower profits, but comes with risk.
If you underestimate, Revenue may charge interest (currently 10% annually) on the shortfall.

Option 3: 105% of the tax liability from two years ago

Only available if you pay by direct debit through ROS.
It offers predictability but only suits certain business types.

Whichever method you choose, payment is made through ROS or myAccount via debit card, credit card, or bank transfer.

What Records You Need to Keep — and Why

Good record-keeping is essential. Not only does it help you file your tax return accurately, but it’s also a legal requirement under Irish tax law.

You must keep:

• Sales and income records: Invoices, receipts, payment confirmations, bank statements
• Expense documentation: Receipts for business purchases, supplier invoices, utility bills
• Mileage logs: If you claim vehicle expenses, you need a record of business-related trips
• Home office calculations: If working from home, keep evidence of rent, electricity, internet usage
• Bank and credit card statements: Especially if you use them for both personal and business spending

How long must records be kept?

Revenue requires sole traders to retain all relevant records for at least 6 years from the end of the tax year to which they relate.

Failing to maintain proper records can result in:

• Disallowance of expense claims
• Additional tax assessments
• Penalties or interest
• A full Revenue audit

Consider using bookkeeping software (like QuickBooks or Surf Accounts) or working with an accountant to stay organised.

A Realistic Example

Let’s say you earned €40,000 in total business income in 2024. After deducting €10,000 in allowable business expenses, your taxable profit is €30,000.

Based on current rates:

• Income Tax: 20% of €30,000 = €6,000
• PRSI (Class S): 4% of €30,000 = €1,200
• USC: Approx. €900 depending on income bands

Total tax bill: ~€8,100

If this was your first year trading, you'd pay the full €8,100 by 31 October 2025 for 2024 plus €8,100 as your Preliminary Tax for 2025 — a total of €16,200 due at once.

This is why it's so important to budget throughout the year and not wait until the deadline to plan your payments.

Final Thoughts

Preparing your Form 11 return as a sole trader isn’t just about submitting a form — it involves understanding your tax obligations, budgeting for Preliminary Tax, and keeping solid records throughout the year.

If you're unsure about any part of the process, working with a Chartered Tax Advisor can save time, stress, and potentially money. A well-prepared return reduces the risk of penalties and maximises any reliefs you’re entitled to.

Need Support with Your Return?

At Irish Tax Hub, we specialise in helping sole traders and freelancers across Ireland file accurate, compliant returns. Every return is personally reviewed by Damien Roche (CPA, ACA, CTA), so you can file with confidence.

Purchase a plan that fits your needs or contact us today to get started.