What a sole trader is, legally
A sole trader is not a separate entity. You are the business. Its income is your income, its debts are your debts, and its contracts are your contracts. There is no incorporation, no share capital and no public filing of accounts.
That simplicity is the whole appeal, and the unlimited liability is the whole cost. Everything else is administration.
Step one: register for income tax
Registering as a sole trader means telling Revenue that you have income outside the PAYE system. There are two routes.
- Form TR1, if you are not already registered for ROS. This is the paper or online registration form for individuals starting a trade or profession.
- eRegistration through ROS, if you already have a ROS account — for example because you previously filed a Form 12 or registered for another tax.
You will need your PPS number, the date the business commenced, the nature of the trade, and your business address. Revenue registers you for income tax, and at the same time you can register for VAT and for employer PAYE if you need them.
Register as soon as you start trading. Revenue expects registration in the tax year you commence, and late registration is one of the easier things for them to spot when the first return finally arrives.
Step two: register a business name, if you need one
If you trade under your own name exactly as it appears on your documents, no business name registration is required. The moment you add anything — a trading style, a descriptive word, a made-up name — you must register it with the Companies Registration Office on Form RBN1, within one month of first using it.
What you will actually owe
Sole traders pay income tax, the Universal Social Charge and PRSI on their trading profit — that is, income after allowable business expenses, not turnover.
| Personal circumstances | Band at 20% | Balance |
|---|---|---|
| Single or widowed, no qualifying child | €44,000 | 40% |
| Single, qualifying for the single person child carer credit | €48,000 | 40% |
| Married or civil partners, one income | €53,000 | 40% |
| Married or civil partners, two incomes | €53,000 plus up to €35,000 transferable | 40% |
On top of income tax, USC applies at 0.5% on income up to €12,012, 2% from €12,012.01 to €28,700, 3% from €28,700.01 to €70,044, and 8% above that. Self-employed PRSI is paid at Class S.
Against that, a self-employed person is entitled to the Earned Income Tax Credit, worth €2,000 in 2026, alongside the personal tax credit of €2,000 for a single person.
The Form 11 cycle, and preliminary tax
Sole traders file a Form 11 income tax return each year under self-assessment. The pay and file deadline is 31 October following the tax year, with an extension to mid-November for those who both file and pay through ROS. For the 2025 tax year the deadline is 31 October 2026, extended to 18 November 2026 on ROS.
The part that surprises people is that on that same date you settle the previous year and pay preliminary tax for the current one. In your second year of trading you are effectively paying two years of tax at once.
- Balance of income tax, USC and PRSI for the year just ended.
- Preliminary tax for the current year — normally 90% of the current year's expected liability, or 100% of the prior year's.
VAT, and when it starts to apply
Registering as a sole trader does not register you for VAT. That is a separate obligation which begins when your turnover in any continuous twelve-month period passes €42,500 for services or €85,000 for goods, or as soon as you can reasonably expect it to.
What you can deduct
The test is that the expense was incurred wholly and exclusively for the purposes of the trade. Where something has both a business and a private use, you apportion it and keep the basis of the apportionment.
- Materials, stock and direct costs of delivering the work.
- Business insurance, professional subscriptions and accountancy fees.
- Motor and travel costs on a business-use proportion, supported by a mileage record.
- A reasonable proportion of home running costs if you genuinely work from home.
- Capital allowances on equipment, normally at 12.5% a year over eight years.
What you cannot deduct is your own drawings. Money you take out of the business is not an expense — it is the profit being paid to you, and it has already been taxed as profit.