Compare PAYE employment vs self-employed income in Ireland—including USC, PRSI, and pension—before you trust headline gross. On **€60,000** PAYE, combined income tax + USC + PRSI in this toy model often leaves **~€41k–€43k** net. Matching that as a sole trader frequently requires **€72k+** profit before expenses unless your costs are tiny.
Sole trader basics in Ireland
Schedule D profits face income tax (20% standard to €42,000, 40% above), USC (0.5–8% bands in this teaching model), and PRSI Class S (~4% on relevant self-employed profits). You file annually, pay preliminary tax, and buy your own pension, cover, and VAT discipline once over thresholds.
Limited company headlines for Irish contractors
A Ltd pays 12.5% corporation tax on trading profits in many cases. You extract cash via director salary (PAYE + employer PRSI ~11.15% on salary in our comparator line) and potentially dividends taxed through personal rates and USC. There is double-layer compliance: payroll, B1 annual return, and proof of reasonable director remuneration if Revenue challenge splits.
When Ltd structure makes sense in Ireland
Ltd often enters the conversation above €80k–€100k retained profits where deferral and pension via company are material, you need limited liability badges for procurement, or you sell to clients who insist on limited company invoicing. Below that, sole trader simplicity wins unless your adviser shows clear net savings after accountant + filing costs.
VAT and invoicing differences
VAT registration thresholds (€37,500 services / €75,000 goods in teaching notes) hit many contractors early. Sole traders invoice personally; Ltd invoices in the company name with RCT sensitivity in construction.
Three EUR examples
Illustrative only—your credits and exact USC/PRSI bases will differ:
- €60,000 revenue/profit (sole trader) vs PAYE package of similar employer cost often shows USC + Class S narrowing the gap vs a €60k salary, while Ltd might retain cash inside the company at 12.5% until distributed. - €90,000: marginal 40% income tax and higher USC slices appear; employer PRSI on a director salary of €90k is a meaningful Ltd cost line. - €130,000: dividend vs salary mix and surcharges dominate; sole trader PRSI Class S and income tax stack heavily—Ltd modelling needs bespoke salary/dividend advice.
Three contract structure examples
- €45k PAYE: ~€32k net here. - €45k Schedule D profit: ~€28k after simplified PRSI/USC stack. - €85k PAYE: ~€54k net—freelancers quoting €85k revenue usually keep €10k–€15k less unless they expense aggressively.
What is missing
Rent relief, pension AVCs, and BIK are not modeled—VERIFY with your agent.
Important
Indicative only — not tax or legal advice.
Who benefits most from each structure?
When sole trader wins
Prefer Schedule D when:
- **Profits stay modest** and you want minimal filing overhead.
- You **expense** real travel, equipment, and home-office (where allowed).
- You do **not** need corporate shielding or retained-cash deferral.
When Ltd company wins
Incorporate when:
- **Retained profits** are large enough that corporation tax + controlled extraction beats top personal rates on all income—**model with an adviser**.
- **Clients require Ltd** or you carry contracts where liability matters.
- You run **payroll** for others or plan **shareholder** structures.
FAQ
A sole trader is taxed personally on business profits via income tax, USC, and PRSI Class S; a limited company is a separate taxpayer (often 12.5% corporation tax on trading profits) and you take money out via salary and/or dividends, each with its own tax and payroll rules.
Sometimes at higher retained profits or when salary/dividend planning is done carefully, but small traders often net more simply as sole traders once you count accounting and payroll costs—not a universal rule.
This page uses the same Irish PAYE vs sole trader calculator as our main Ireland tool for cash modelling; full Ltd optimisation requires your adviser because salary, dividends, and surcharges interact.
Yes, typically by incorporating and transferring the business with professional help; watch VAT, RCT, asset transfers, and preliminary tax timing.