Total business profit before any tax
Salary you'd pay yourself as company director
Company structure saves you more
Tax saving: €8,010.74 per year
Sole Trader
Company
Key considerations beyond tax
While tax savings are important, other factors include: limited liability protection with a company, annual CRO filing fees (around EUR20), audit requirements for larger companies, close company surcharges on undistributed profits, and employer PRSI obligations.
Sole trader advantages
Sole traders benefit from simplicity: no company law compliance, no directors' duties, simpler accounts, and the earned income tax credit of EUR1,875 (2025). However, you have unlimited personal liability for business debts.
Company advantages
Companies benefit from the 12.5% corporation tax rate on trading profits, limited liability, easier transfer of ownership, and the ability to retain profits in the company. However, extracting profits via salary or dividends triggers additional tax.
Note: This is a simplified comparison. Actual results depend on your specific circumstances including employer PRSI, pension contributions, and other deductions. Consult a tax adviser for personalised advice.
Comparing the tax and legal differences to help you choose the right structure
What is the main tax difference between a sole trader and a company?
A sole trader pays Income Tax at up to 40%, plus PRSI (4%) and USC (up to 8%), giving a top rate of about 55%. A company pays Corporation Tax at 12.5% on trading profits. However, to take money out of the company (via salary or dividends), you pay extra tax. The overall saving depends on how much profit you leave in the company versus how much you extract.
At what income level should I consider setting up a company?
The breakeven point is typically around €80,000 to €100,000 in annual profit. Below that, the administrative costs and complexity of a company often outweigh the tax savings. Above €100,000, the gap between 55% sole trader tax and 12.5% corporation tax becomes significant, especially if you can leave some profits in the company.
What are the extra costs of running a company?
A company has ongoing costs that sole traders do not: annual CRO filing fee (€20), company secretarial costs (€200 to €500), higher accountancy fees (€1,500 to €3,000 vs €500 to €1,500 for a sole trader), possible audit fees if turnover exceeds €12 million, and employer PRSI at 11.05% on any salary you pay yourself.
What is limited liability and why does it matter?
As a sole trader, you are personally liable for all business debts. If your business owes €50,000 and cannot pay, creditors can pursue your personal assets including your home. A company is a separate legal entity, so your liability is normally limited to what you invested. This protection is a major reason people incorporate, especially in higher-risk industries.
How do I extract money from a company tax-efficiently?
The most common methods are: paying yourself a salary (taxed at normal PAYE rates plus employer PRSI at 11.05%), paying dividends (no tax deduction for the company, taxed as income in your hands), or making pension contributions (tax-deductible for the company, no benefit-in-kind for you). Most owner-directors use a combination of salary and pension contributions.
What is the close company surcharge?
Most owner-managed companies in Ireland are "close companies" (controlled by 5 or fewer people). If a close company does not distribute at least 50% of its after-tax trading profits, a 20% surcharge applies to the undistributed amount. For investment income, the surcharge is 20% on any undistributed income. This can reduce the benefit of retaining profits in the company.
Can I switch from sole trader to a company later?
Yes. Many people start as sole traders to keep things simple, then incorporate when profits grow. You can transfer your business to a new company. The transfer may trigger Capital Gains Tax on business assets, but reliefs are available (such as Section 600 relief). You will need a solicitor (€500 to €1,500) and accountant to set it up properly.
What about PRSI differences?
Sole traders pay PRSI Class S (4%) and get fewer social welfare benefits (no jobseeker’s benefit, no illness benefit). Company directors who pay themselves a salary and are a PAYE worker pay Class A PRSI (4% employee + 11.05% employer), which gives access to the full range of benefits including illness benefit, maternity benefit, and jobseeker’s benefit.
Revenue-Aligned: Based on 2025 Revenue rates and thresholds. For personal advice, speak to a qualified tax adviser.
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Disclaimer: This calculator provides estimates based on current HMRC rates and thresholds for the 2025/26 tax year. It does not constitute professional tax, financial, or legal advice. Your actual liability may differ depending on your individual circumstances. Always consult a qualified accountant or tax adviser before making financial decisions. Read our terms