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Contractor guide
Contract roles in Ireland are open to contractors with their own limited company, to contractors paid through an umbrella company and sometimes to sole traders. The choice changes who deducts tax and PRSI, when VAT applies and what you keep from your day rate. Here is what each one means.
| Umbrella company | Sole trader | Limited company | |
|---|---|---|---|
| Who you work for | Employee of the umbrella company, which bills the agency or client | Yourself, registered as self employed with Revenue | Your own company, which signs the contract and invoices |
| Income tax | Income tax, USC and PRSI deducted through payroll (PAYE) | Paid by you through self assessment (Form 11) and preliminary tax | Corporation tax on company profits, then PAYE on your salary and tax on any dividends |
| Costs taken from the rate | Employer PRSI and the umbrella fee | Your own costs, and Class S PRSI on your profits | Accountant, insurance and employer PRSI on the salary your company pays you |
| VAT | Handled by the umbrella company | Register once your turnover from services is likely to exceed €42,500 a year | Same threshold, at company level; many clients prefer a VAT registered company |
| Insurance | Usually covered by the umbrella company | Professional indemnity and public liability often required | Professional indemnity and public liability often required |
| Paperwork | Timesheets only | Bookkeeping, Form 11, VAT returns once registered | A company to run: CRO annual return, accounts, corporation tax return, payroll |
An umbrella company employs you for the length of the assignment. It invoices the recruitment agency or the client, takes its fee and employer PRSI out of the amount billed, and pays you a salary through PAYE with income tax, USC and PRSI deducted. You submit timesheets and have no company of your own to run, which makes it a popular option for short contracts and for contractors new to Ireland.
As a sole trader you register with Revenue as self employed and invoice the agency or the client directly. You pay income tax, USC and Class S PRSI through self assessment, with preliminary tax paid during the year, and you register for VAT once your turnover from services is likely to exceed €42,500 a year. Agencies and clients often ask for professional indemnity and public liability insurance. It is simple to set up, but your business is not separate from you personally, and some agencies prefer to contract with a company.
Many experienced contractors in Ireland work through their own private company limited by shares, registered with the Companies Registration Office (CRO). The company signs the contract, invoices, charges VAT once registered and pays corporation tax on its trading profits, at 12.5%. You take a salary through PAYE and can take dividends. A close company surcharge can apply to the professional income of a service company that is not paid out, so plan how you take money out with your accountant.
Some agencies also put contractors directly on their own payroll for the contract. It works like an umbrella: tax is deducted at source and you have no company to run. Check whether the rate quoted is the gross rate before employer costs or the amount paid to you.
This guide gives general information, not tax, legal or financial advice. Check your situation with a chartered accountant or tax adviser, or with Revenue.
Convert a salary into a day rateWhat is the difference between a limited company and an umbrella company?
With your own limited company, the company signs the contract, invoices the agency or client, pays corporation tax and pays you a salary and dividends. With an umbrella company, the umbrella employs you for the contract, bills the agency and pays you through PAYE after deducting employer PRSI and its fee. The umbrella is simpler, the limited company usually leaves you more of the rate but comes with more admin.
Can I contract as a sole trader in Ireland?
Yes. You register as self employed with Revenue, invoice the agency or client and pay income tax, USC and Class S PRSI through self assessment. Some agencies and large clients prefer to contract with a limited company or through an umbrella, so check before you accept a role.
When do I need to register for VAT?
A business supplying services must register for VAT once its turnover is likely to exceed €42,500 in a 12 month period. You then charge VAT on your invoices, usually at the standard rate of 23%, and file VAT returns with Revenue. You can also register voluntarily below the threshold.
Can Revenue treat a contractor as an employee?
Yes. Revenue and the Department of Social Protection look at the reality of the working relationship, using the Code of Practice for Determining Employment Status and the five question framework set out by the Supreme Court in 2023. Working through a company does not settle the question on its own.
How do I compare a salary with a day rate?
Add the employer costs an employer would pay on top of your salary, such as employer PRSI and pension, then divide by the days you will actually bill once annual leave, public holidays and gaps between contracts are taken out, and add your accountant and insurance costs. Our day rate calculator does the maths for you.
