Setting Up Your Own Business and Director's Pension in Ireland
An UPDATE ON MY PROGRESS
How Did My Company Do in 2021?
A while back, I wrote an article about setting up my own company in January 2020 with a view to structuring my income in a more tax-efficient way. At the time, I was interested in taking more control over my time, my income and the projects I wanted to work on.
Three really big things happened with my company in 2021.
- I started paying myself a salary!
- The company brought in €15,000 this year.
- I FINALLY got around to setting up a directors pension.
I started paying myself - using FREE payroll software for Ireland
I managed to find a really good payroll software that offers a free licence for one-person companies. Hats off to BrightPay for this incredibly generous offer and I have to say that the software is a breeze to use.
No, they are not paying me to say this and I have no affiliation with them but I have already benefitted from one year’s worth of free payroll software and they even offer email support.
Check them out if you’re a one-person business or send the link onto anyone you might know who would benefit: https://www.brightpay.ie/pricing/
The setup of the software was pretty easy and once you punch in all the information you have since registering with ROS/Revenue, you’re good to go.
When I finally started sending invoices out to clients and got a healthy balance on my Revolut business account; I knew it was time to start taking a salary. I calculated an amount to pay myself based on what I was already earning in my other PAYE job.
My teaching salary is €26,000, so I took €9,300 and divided it by 12 so I would be paying myself JUST AT the 20% tax bracket cut off.
€15,000 Company Income in 2021
I am simply using Google Sheets to keep track of all invoices and expenses. I do not have any invoicing software yet but for now that is fine because my client base is small and uncomplicated.
I engaged an accountant at the end of 2020 to deal with my company and personal income tax statements as I could write the entire cost off as a business expense. This allowed me to avoid the headache of dealing with ETFs (which I now want to get rid of) on my personal tax return.
We were also in the depths of a COVID lockdown, so I never got to actually meet face-to-face with the accountant. This was also the first time I had ever engaged and accountant so I have no basis for comparison in terms of service and price. I believe I got a good deal as he wanted to attract new business and he did my business and personal accounts for €738.
The other critical thing to remember is that the company now pays a proportion of my broadband, heating and lighting and all of these are legitimate business expenses.
Honestly, I still feel nervous about accounts and annual returns because I am so new to running a company. I hope to actually meet my accountant this year and ask him to explain the process more to me.
€3,000 into my New Director's Pension
So this was one of the most attractive reasons for moving from “employee” to “contracting. Admittedly though, it took me a lot longer than it should have to get it sorted.
Just before the end of 2021, I was in touch with DAVY. However, my application with them for a director’s pension hit a road block due to some legal/technical change that I didn’t understand. They wanted a minimum investment of €100,000. Nope, sorry.
I turned to Irish Life on the recommendation of a friend. The setup process was fairly straight forward but I really didn’t do a lot of research before I went ahead. I figured it was better to get the thing up and running first. They calculated, based on what I was paying myself, how much I was able to put in.
I transferred €3,000 into my new director’s pension and I can write this off as a business expense to reduce my company’s tax liability. All the reading I have done on the topic points to director’s pensions as one of THE BEST ways to transfer wealth out of a company and into your pocket in the most tax-efficient way.
What does my company do? And what's the plan for 2022?
My company does web development. I mostly work on the frontend of web applications/websites. I have set up e-commerce websites and WordPress websites for clients who want to update their own content. I’m looking for work so leave you contact details below if you want any website work done or you know someone I should talk to.
I am also looking for a job in 2022! This is in contrast to what I have said above about taking control of my time and freedom. I have looking at the attractive salaries on offer for web developers wright now. I am also looking for an opportunity to learn much more about web development than my current endeavors expose me to. I want to try being part of a bigger team in a large organisation.
I am confident that I can still keep my own company going while working a full-time job. Plus, I am in talks with my manager about taking a career break from my teaching job.
I am also open to more contracting roles, but my research and chats with recruitment agencies so far have highlighted my need to upskill some more if I want to land contracting roles. I have spent a fair amount of time over xmas doing exactly that.
Looking forward to what 2022 brings.
Give it a try...
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