Last week I informed one of my clients that she has an Income tax bill of €13,500 for 2023
This might not seem like a large amount for some people, but it was very large for her.
Let’s call her Ms X..
Here are some of the facts about Ms X for 2023
• Works fulltime (45K P.A) and carries on a trade when she is not working in full-time employment.
• Has sales revenue of 75K and profits of 26k in the trade
• All tax credits are allocated against her fulltime employment.
As all credits were utilised in her employment there was no tax credits and no cut-off available to allocate against the trade for 2023.
Therefore, the trade profit is taxed at
Tax 40% €10,400
USC 8% €2080
PRSI 4% €1040
Some may say that she is in a better financial position than others. And this may be the case…..
However, we always need to look at ways to be more tax efficient.
Its not about evading tax its about avoiding tax and there is a huge difference
Tax avoidance is the legal practice of minimizing tax liabilities through strategies such as deductions, credits, and the use of tax-efficient investments. Individuals and businesses take advantage of tax laws to reduce their taxable income and, consequently, their tax burden.
On the other hand, tax evasion is the illegal act of not paying taxes owed by misrepresenting income, inflating deductions, or hiding money in unreported accounts. Tax evasion is a crime and can lead to severe penalties, including fines and imprisonment.
I offered a solution to my client, incorporate this trade and take advantage of the
enjoy various tax benefits, such as lower tax rates on retained earnings and potential deductions for certain expenses.
In conclusion, understanding and implementing effective strategies can significantly help small business owners reduce their tax burden. By proactively managing their finances, they can minimize their tax burden while ensuring compliance with tax regulations.