Are you serious about your business? Most people will say yes to this question. They have to be. There are bills to pay. Plus, you need a few bob for the annual trip abroad, not to mention the taxman taking his cut. It pays to be serious about your business. Here’s why.
- Rogue One
- Taxes
- Benefits for Tommy
- The Business Journey
Rogue One
I put this caller down as Rogue One. A call a few years ago went along these lines
“What line of work are you involved in Tommy?”
I do a bit of gardening and landscaping around the area.
Ok, so what would your annual sales number be?
It would be around the forty thousand, but I try and keep it below the VAT threshold.
Very good. What about employees? Do you have anyone working for you?
Oh, I have a couple of lads that I pay cash to. They are not on the books. They didn’t want any of that.
You can see where this is going. Suppressed sales, no payroll, cash floating around everywhere. Tommy is trying to meet us, so we can take him on as a client. Based on what he told me, I said to Tommy that we’d have very little interest in having him as a client. However, if he wanted to meet one of the team here for a chat, then we could set that up. But he’d have to pay for that meeting.
We never heard from Tommy again. Thank God. To me, Tommy is a messer, and he would be the polar opposite of a client that we’d want to take on. Tommy the tax dodger wasn’t serious about his business. He was serious about evading tax, though! Talented at that, and handy at the bit of gardening too!
Taxes
If Tommy did things right, his taxes wouldn’t be that high. I didn’t get that far into the call to discuss his personal details. So, I will assume he is married, and his wife works part-time. This call happened a few years ago, but let’s roll it forward to 2025.
He had a “road to Damascus” moment at the end of 2024. He was above at the grotto in Mellary, and he swears that he saw her lady moving. His wife, who coincidentally is a Mary too, says that’s the 10 large Bulmers in Haughtons last night talking.
“No, you are wrong Mary, I tell ya. From the start of 2025, I am going legit. That’s no word of a lie.”
2025
On the 2nd of January 2025, he rings his accountant Ben Dover of Dover, Dover, Rover & Sons. The upshot is Tommy is now registering for VAT. Plus, he wants to put the two lads onto the books and run a weekly payroll for them. He tells Ben that he expects his sales to be €80,000 in 2025. Ben praises Tommy for his business acumen. With such a large increase in sales compared to previous years, Facebook is really working for him.
Tommy will do bi-monthly VAT returns as the turnover is greater than the annual threshold. The two employees work part-time but will have longer hours in the Summer. They go onto the payroll but will get jobseeker’s benefit for the days not working with Tommy. The payroll and VAT returns run smoothly during 2025, and it’s now February 2026. Ann Dover crunches the numbers, and the accounts show a profit of €55,000. Capital allowances on a van and equipment come to €5,000. Mary’s income for 2025 was €10,000, and she didn’t pay any tax on that.
Tax liability
| Trading Profit | €55,000 |
| Less Capital Allowances | (€5,000 |
| Mary’s income | €10,000 |
| Taxable Income | €60,000 |
| Tax €60,000 x 20% | €12,000 |
| Less Tax Credits | (€8,000) |
| Tax Liability | €4,000 |
| Add PRSI | €2,063 |
| Add USC | €1,046 |
| Final Tax Liability | €7,109 |
His effective tax rate is about 13%. Quite a low number. Tommy thought it would be much higher. He was panicking that he’d tip into the higher rate of 40%
Tax bands for 2025
It’s good to know the tax bands for 2025. The lower tax band is 20%, and the higher tax band is 40%
| Single or widowed first | €44,000 |
| Single or widowed single parent first | €48,000 |
| Married first | €88,000 |
| Higher income-earning spouse – max | €53,000 |
| Balance for other spouse up to | €35,000 |
So, a single person can have a profit of up to €44,000 and pay at the 20% rate. That increases by €4,000 for a single parent. A married couple can have a profit of up to €88,000 at the lower rate. The most a higher-income-earning spouse gets at the lower rate is €53,000. That leaves €35,000 at the lower rate for the other spouse. If both spouses earn more than €44,000, then the lower rate band of €88,000 is split equally.
Before the last election, both Fianna Fáil & Fine Gael promised to increase the lower rate bands. Fine Gael by €2,000 per annum and Fianna Fail to €50,000. Funds permitting, the annual increase of €2,000 for a single person and €4,000 for a married couple will continue.
Benefits for Tommy
The benefits for Tommy of going legit are many. He has developed a new found confidence. Some of his mates would even say that Tommy is walking around with a strut. Chest out and wallet hidden, his friend Mick remarks. With Tommy becoming serious about his business, the following has happened
Paperwork
By doing VAT every two months, his paperwork is much better. Ben introduced him to a handy little app called DEXT. He uses this to capture all his diesel receipts, and all his invoices go there for all other costs by email. It reduces the amount of paperwork and acts as a store for all his invoices, in case Revenue need them. Plus, it helps him reduce the VAT bill by capturing all the VAT on his costs.
Revenue
Everything is up to date with Revenue. He files the VAT returns and makes the payments on time. The payroll is up to date, too, and he’s happy now that he has the two lads on the books. He knows that they’ll be looked after if he ever has to let them go. He also knows what his tax bill for 2025 is. As he paid enough preliminary tax for 2025, he has until the 31st of October to pay the balance owed.
Now that he’s doing everything right, he’s not worried about Revenue anymore. He’s confident advertising his business on social media. No longer looking over his shoulder, the plan is to take on bigger jobs. Get rid of the small cash jobs and invest in more equipment. Having tax clearance is a bonus too.
Finance
Tommy spotted a quality second-hand Ford Ranger that he’d love for €20,000. He has to finance most of the cost. The guy at the dealership asked him for his latest set of accounts and tax clearance. With his 2025 accounts done already and having tax clearance, the loan was approved quickly. The finance guy was very happy with the repayment capacity.
The Accountant
Even Ben, the accountant, is happy to see him. Why wouldn’t he, thinks Tommy, now that I am paying him a lot more! Before 2025, they did an Income and Expenditure Account every year. Now Ben does an annual set of sole trader accounts that has a Profit & Loss Account & Balance Sheet.
Ben set him up on Xero, which he loves, as he can send out his invoices in seconds. This used to take ages before. Plus, he doesn’t waste time calling into the bank for statements. They automatically go into Xero. The technology is mad! Business is on the up, and even Ben mentioned a company. The next step on the business journey
The Business Journey
Tommy is now on a business journey. If he transfers the business to a company, great. If not, that’s ok too. As long as he keeps doing the right thing, the structure may not be the most important thing to him. If the business continues to grow and become more profitable, then a company is the logical next step. It would give him many benefits to include
- Limited Liability
- Greater repayment capacity if looking for more finance
- Salary flexibility
- Lower taxes over time. The company tax rate is 12.5%
- Better pension planning.
- Benefits like small benefit exemption and the company paying his medical insurance
When profits increase and the annual tax bill hits over €30,000, a company is a serious consideration. Whatever the structure, be it a sole trader, partnership, or company, it’s the attitude of the person that counts. Do you want to do things right and sleep well at night knowing everything is looked after? Like new Tommy from 2025 onwards. Or are you like the old Tommy, pre-2025? A bit of a rogue, taking chances and only doing things half arsed.
What way will we look back on our lives? I’d like to be like the dying man [ in 40 years’ time, mind], looking back in Frank Sinatra’s “My Way”
I’ve lived a life that’s full
I travelled each and every highway
And more, much more than this
I did it my way
So, if you are serious about your business, we’ll be deadly serious when looking after it for you.
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