Tax as a Sole Trader in Ireland – Part 4: Tax Reliefs & Credits

Welcome to the final post in our four-part series on tax for sole traders in Ireland. So far, we’ve covered how to register, keep records, and meet filing deadlines. Now, we turn to one of the most important — and often neglected — aspects of self-employed tax: how to reduce what you owe.

Whether you’re just starting out or have been trading for years, understanding tax deductions, credits, and reliefs can make a big difference to your bottom line.

Understanding the Basics: Deductions, Credits, and Reliefs

Before we dive into the details, it’s worth clarifying the differences between these terms:

• Tax Deductions: Reduce your taxable income before your tax is calculated. For example, if you earn €100,000 and claim €10,000 in deductions, you’ll be taxed on €90,000. This means that you save €5,200 in tax (€10,000 at a tax rate of 52%).
• Tax Credits: Reduce your actual tax bill on a euro-for-euro basis. For example, a €2000 credit means you pay €2,000 less in tax.
• Tax Reliefs: These may be credits or deductions, often designed for specific circumstances (e.g. pension contributions, rent paid, medical costs).

As a sole trader, it's your responsibility to ensure you’re claiming everything you’re entitled to — and not leaving money on the table.

1. Claiming Allowable Business Expenses

As a self-employed person, you can deduct certain costs directly related to running your business. These reduce your taxable income and, ultimately, your tax bill.

Common deductible expenses include:

• Rent for business premises or a portion of your home (if used for business).
• Utilities: electricity, gas, internet, phone — pro-rated if shared with personal use.
• Office supplies: stationery, IT equipment, software.
• Professional fees: accountant, solicitor, consultancy.
• Insurance: business insurance, public liability, professional indemnity.
• Marketing & Advertising: website costs, social media ads, branding.
• Travel & Subsistence: mileage, public transport, meals (within Revenue guidelines).
• Training & Development: courses directly related to your trade.

Important: Personal expenses are not deductible. Mixed-use items (e.g., your home internet) must be apportioned fairly.

Record-keeping is key. Keep receipts, invoices, and bank statements to back up every claim.

2. Tax Credits for Sole Traders

Most self-employed individuals are entitled to the following standard tax credits:

• Personal Tax Credit €2,000.
• Earned Income Credit €2,000.

That’s €4,000 in tax savings right off the bat — a vital offset against your income tax liability.

Note: Sole traders cannot claim the PAYE credit (also €2,000) — that’s reserved for employees.

3. Additional Tax Credits & Reliefs Worth Exploring

Depending on your situation, there may be other credits and reliefs you can claim. Here are some of the most common for sole traders:

Medical Expenses Relief

• 20% relief on qualifying unreimbursed medical costs (GP visits, prescriptions, consultants, etc.).
• Non-routine dental (e.g. crowns, root canals) also qualifies.
• Claims can be backdated for up to four years.

Pension Contributions

• Contributions to approved personal pensions (PRSA or RAC) qualify for tax relief at your marginal rate (20% or 40%).
• Annual contribution limits depend on your age (ranging from 15% to 40% of net relevant earnings).

Home Carer Credit

• Worth €1,950 in 2025 if you support a dependent at home (child, elderly parent, etc.) and your spouse has low income.

Tuition Fees Relief

• Tax relief (20%) on tuition fees (excluding registration) for approved third-level courses in Ireland or the EU.
• Max of €7,000 per person per year.

Rent Tax Credit

• New for 2023–2025: Up to €1,000 per adult (or €2,000 jointly) if you're renting a qualifying property.
• Available even if you're renting privately without housing support.

Start-Up Refunds for Entrepreneurs (SURE)

• If you invest in a limited company (i.e., you move from sole trader to company director), you may be eligible for an income tax refund of up to 40% of your investment..
• Conditions apply, but it’s a generous scheme for early-stage founders.

4. Avoiding Overpayment: Practical Tips for Sole Traders

Even if you're diligent, it's easy to overlook entitlements. Here's how to avoid overpaying:

File Online with MyAccount or ROS

• Revenue’s platforms allow you to review your tax credits and make changes throughout the year.
• Easy to submit claims for medical expenses, rent credit, and tuition fees.

Keep Detailed Records

• Every deduction must be supported by documentation.
• Use apps or software to track expenses, mileage, and income consistently.

Review Annually

• Tax entitlements change. So does your life.
• Children, education, health, marriage, or changes in income can affect what you’re eligible to claim.

Consult a Tax Professional

• Especially if your income is growing or you have multiple sources of income.
• A good accountant can more than pay for themselves by uncovering savings you might miss.

Final Thoughts

Running your own business is demanding enough — don’t let tax be harder than it needs to be. By staying informed and proactive, you can ensure you're only paying what you owe — and no more.

This wraps up our 4-part series on tax for sole traders in Ireland. Here’s a quick look back:

• Part 1: Getting Started – Registering and understanding your obligations
• Part 2: Keeping Records – What to track, and why it matters
• Part 3: Filing & Deadlines – Filing your return, payment deadlines, and avoiding penalties
• Part 4: Tax Reliefs & Credits – How to reduce your bill and stay tax-efficient

Still unsure what you can claim? Want help filing? Contact Irish Tax Hub for tailored advice — whether you're a side-hustler or a full-time sole trader, we're here to help you save time and money.