Guidelines used by self-employment Section in Waterford
Table of contents
- Persons classified as self-employed
- Persons excluded
- Rates of contribution
- Categories not covered by self-assessment
- Examples of reckonable income.
- What is excluded from reckonable income.
- Scheme for share fishermen
- Voluntary Contributions
- Where to get more information
All self-employed persons aged between 16 and 66 years of age, with reckonable income or emoluments of €5,000 or more per year, are liable for compulsory insurance at Class S.
The vast majority of self-employed people will return their income to the Revenue Commissioners under the self assessment system. However, certain categories of self-employed will pay their PRSI through the PAYE system or directly to the Department of Social Protection. See paragraph 7 for details.
The legislation dealing with the self-employed is:-
Chapter 3 of Part II of the Social Welfare Consolidation Act 2005, and
Chapter 2 of Part II of the Social Welfare (Consolidated Contributions and Insurability) Regulations, 1996 (S.I. 312 of 1996)
An information leaflet, Guide to PRSI for the Self-Employed - SW 74 is also available.
PRSI for the self-employed is administered by:-
Client Eligibility Services
Department of Social Protection
LoCall: 1890 690 690
3) Persons classified as self-employed
PRSI Class S is paid by self-employed people such as:
- professional people (for example doctors, dentists, solicitors etc)
- sole traders, people in business on their own or in partnership, farmers, religious, contractors, sub-contractors
- people with income from investments, rents or maintenance payments
- employees who are also self-employed in a trade or profession
- company directors, and others, who pay their tax through the PAYE system but who are not regarded as employees for social insurance purposes
- certain artists and childminders who have been made exempt from income tax by the Revenue Commissioners
- spouses or civil partners of self-employed contributors who participates in the business
4) Persons excluded
Certain categories of persons are excluded from paying Class S. The legislation covering this is Part III of the First Schedule of the Social Welfare (Consolidation) Act, 2005.
The following are some examples:
- Relatives of the self-employed (other than spouses or civil partners) who help out in the running of the business, but who are not business partners. Clarification of a persons insurable status should be sought from Scope Section, Gandon House, Amiens Street, Dublin 1, Ph (01) 704 3000.
- Persons in receipt of Pre-Retirement Allowance on an ongoing basis
- Persons with reckonable annual income of less than €5,000
- Persons who pay contributions at Class A and whose only self-employed income is unearned income such as interest or rent **
- Persons in receipt of an Occupational pension (pension from previous employment) whose only self-employed income is unearned income such as interest or rent **
- Public servants paying Class B, C or D who are also self-employed *
- Persons not ordinarily resident in the State with unearned income.
* From 01/01/2013, a new charge of 4% PRSI will be levied on the self-employed income of this category.
** From 01/01/2014, a new charge of 4% PRSI will be levied on the self-employed income of these two categories. The contribution class will be ‘K’, attracting no benefit entitlements (Section 6, 2013 Social Welfare and Pensions (Miscellaneous Provisions) Act).
PRSI at Class S provides cover for:
- Widows and Widowers Contributory pension
- Guardians payment (Contributory)
- State pension (Contributory)
- Maternity Benefit
- Adoptive Benefit
Current legislation requires that all Class S contributions must be paid in full prior to the award of contributory pensions.
6) Rates of Contributions
Class S contributions are payable at 4% of reckonable income - subject to a minimum payment of €500.
Persons whose annual income is €5,000 or more, who have been deemed to have no tax liability by the Revenue Commissioners, are required to pay a flat rate of €300 direct to this Department.
When the full amount (100%) of income tax and PRSI charged has been paid, Class S contributions should be awarded. Where less than the full amount due has been paid, no contributions should be awarded.
7) Categories not covered by self-assessment
If a person is a self-employed company director their PRSI is deducted by the employer under the PAYE system. Although the PRSI of a company director is deducted by the employer it is the responsibility of each company director to ensure that the correct amount of PRSI has been deducted and remitted to the Revenue Commissioners.
No Net Liability (NNL) cases
A person who has been told by an Inspector of Taxes that they need not make a tax return, who has self-employed income of €5,000 or more per year,is liable to pay a flat rate self-employed PRSI contribution to this Department.
Artists, childminders and other tax exempt incomes
A person who has been granted an Artist income tax exemption by an Inspector of Taxes, or a person who has a tax exempt status from childminding, forestry premiums or stallion fees, is liable to pay Class S PRSI contributions if their self-employment income is €5,000 or more per year. In the case of childminders a flat rate of €500 per year is payable. A rate of 4% of income, or a minimum payment of €500 per year, applies to the other categories.
8) Examples of Reckonable income?
Reckonable income includes income from the following sources:
- Income from a trade or profession,
- Benefit in kind
- Interest, annuities and income from foreign investments
- Rent from any property in Ireland
- Income from which tax has been deducted at source such as annuities, bank interest, or building society interest, maintenance payments and other miscellaneous sources of income not included in the above,
- Income from share dividends/options. For the 2011 year only, if the share options were the subject of a written agreement entered into before 1 January 2011, the charge to PRSI will not apply.
9) What is excluded from reckonable income?
The following types of income are excluded from reckonable income and do not have to be taken into account when calculating the PRSI contribution:
- capital allowances
- any sums received by way of benefit, pensions, allowance or supplement from the Department of Social Protection
- Infectious Diseases Maintenance Allowances or Mobility Allowances paid by the Health Service Executive
- occupational pensions
- any payment received by Office holders. These payments are subject to Class K.
- income continuance payments received by a person forced to leave employment due to illness as long as Revenue has approved the scheme.
- Redundancy payments, golden handshake payments and early retirement bonus.
- certain retirement lump sums in excess of €200,000 which are subject to income tax (also excepted emoluments)
- the early encashment of certain amounts of private pensions which are subject to income tax by individuals in the public sector who had previously been self-employed.
10) Scheme for share fishermen:
A share fisherman, or woman, who is classed as self-employed, may choose to pay an additional PRSI contribution at Class P. This contribution provides cover for:
- limited Jobseekers benefit (up to 13 weeks in each calendar year)
- limited Illness Benefit (up to 52 weeks)
- Treatment Benefit, including dental, optical and aural benefits for themselves and their dependant spouses.
The rate of Class P contribution is 4% of income, subject to the income ceiling applied to self employed contributors. This contribution is additional to the normal Class S payment made by the contributor. In order to remain a Class P contributor a person must continue to be liable for Class S PRSI and ensure that all payments due are up to date.
A person, other than a company director, who becomes self-employed must register with the Revenue Commissioners. They should contact their local tax office which will register them under the self assessment system for tax and PRSI.
Where there is doubt with regard to a person's insurability status the case should be referred to Scope Section (01) 704 3000 of this Department.
A refund of PRSI is payable to a self-employed contributor who reached age 56 on or before 6 April 1988, paid PRSI for the first time on or after that date and does not qualify for either a State Pension (contributory) or State Pension (non contributory). The refund payable is 53% of PRSI paid, which is the pension element of Class S PRSI contributions.
These refunds are administered by Client Eligibility Services, LoCall 1890 690 690.
Section 35 of Chapter 2, Part II of the Social Welfare Consolidation Act 2005 and Chapter 2 of Part III of the Social Welfare (Consolidation Contributions and Insurability) Regulations, 1996 and Statutory Instrument 291 of 1997 apply.
It should be remembered that these refunds are repayable to the Department if the recipient subsequently becomes eligible for either a State Pension contributory or State Pension non contributory.
13) Voluntary contributions
Self employed persons who are not liable to pay PRSI in any year may, subject to meeting certain conditions, be eligible to become a voluntary contributor. See voluntary contributions for full details. Information leaflet SW 8 also refers
14) Where to get more information?
For more information on PRSI for the self-employed, contact your local social welfare office or Self-Employment Section at:
Client Eligibility Services
Dept of Social Protection
LoCall: 1890 690 690
See also information booklet SW 74