How to minimize banking fees for your small business

When running a small business, profitability matters and every dollar counts. Statistics show that about 20% of small businesses fail in the first year and almost 70% fail in their 10th year. One of the most common reasons is the inability of the business to become profitable. Various factors affect the profitability of a business and one key aspect is the high banking transaction costs. Business accounts normally accrue higher fees than individual accounts. It’s important for businesses to keep their bank transaction costs minimum to see better chances of being profitable. Here are 5 important tips for small businesses to minimize banking fees.

1.    Understand the Banking Charges

It’s important to know how much you spend every month as banking charges. Charges almost apply for every transaction and the different facilities offered by the banks. Different banks have their own fees structure and it’s crucial that you pay attention to it. It’s best to open an account with the bank that offers the lowest account fee and transaction charges.

2.    Online banking

Every bank offers online banking facilities these days and it’s best to take full advantage of these facilities. Online banking helps to save time and have the banking details on your fingertips. Generally, banks tend to offer a package of additional services when you opt for online banking. It is advisable that you try to understand the charges, in case you opt for them, that come with it and a good understanding of the services offered.

3.    Reduce the number of transactions

Most banks charge their customers on a per-transaction basis. Therefore, fewer the transactions, lesser the banking charges you will pay. Plan ahead in the month on the number of withdrawals and deposits you intend to make and try to combine them into a single or few transactions to save on the banking charges.

4.    Alternative payment methods

If your business requires customers to make payments or deposit money into your account, to avoid transaction charges for every single transaction, you can move into the Direct Debit scheme. By opting for this, all your customers’ payments will be credited to your account on a single day (of your preference). In this case, you only need to pay one transaction fee to receive the entire amount. Similarly, when you have to make payments to your vendors, you can opt for the Direct Credit scheme in which you will get billed for your transactions on a particular date.

5.    Never use other bank ATMs

Always use the ATM of the bank in which you hold an account. Using your card on other bank ATMs will earn you charges for every single transaction. Remember to consider the number of ATMs in your locality and the accessibility factor when you open a bank account.

6.    Stay in Credit

End of the day, it’s important to make sure you maintain the minimum bank balance and stay in credit to avoid any charges. Having too many credit cards will be expensive and increases the usage fees. Be aware of the limits on your card and make sure you don’t exceed the limit.


Do I qualify for Rent-a-room Tax Relief?

Most income earned in Ireland is subject to income tax. Depending on the income slab, you will either pay 20% of the income (Standard Rate) or 40% of the income (Higher Rate) as taxes to the Government. So if you are looking at ways to increase your monthly income, your best option is to rent that spare room(s) in your house to private tenants. It could be one of the main room(s) in your house, a basement flat or even a garage converted to a room and attached to your house.

The Revenue introduced the “Rent-a-room” scheme where the rental income earned (by individual taxpayers) will be exempted from tax, provided the income does not exceed the exemption limit.

How does this work?

1. The Rent-a-room scheme is open to all owners and tenants in the State who rent out room(s) or accommodation in their main house. The residence should fall under one of these categories –
a. Primary residence – You necessarily need not to be the owner however the house should be your primary residential property in Ireland. You can even sub-rent the room to another person in which case, make sure your landlord knows about this.
b. Self-contained units such as a basement flat, garage converted into a living room that is connected to your primary residence.

2. According to the Revenue, the annual exemption limit (since 2018) is €14,000 per year. The limit applies to the gross income received for the rented room. This includes any additional amount paid by the tenant for other services like food, laundry, and other services.

3. The rented property should be used for the long term by the tenant.

4. If you are self-assessed, you can use the Revenue Online Service (ROS) to include the amount on your Form 11. If you use the Pay As You Earn (PAYE) system, you can use myAccount to include the amount on your Form 12. Taxpayers have a four-year time limit to claim relief for the tax paid on the rental income over the previous years.

You cannot qualify for the Rent-a-room tax relief if –
1. Your rental income exceeds €14,000 per year
2. You rent out the property for short time periods (such as a guest-house, an Airbnb accommodation, or through an online portal)
3. You rent the property for business purposes or if your employer pays you for the accommodation provided in your family home
4. The property is rented to your partner, daughter or son. There are no restrictions for other family members.

Upon qualification for Rent-a-room tax relief, the income is not liable for Pay Related Social Insurance (PRSI), the Universal Social Charge or income tax. But, the income must be included in the income tax return. There’s also no need for you to register as a landlord with the Private Residential Tenancies Board (PRTB). This makes it easier for you to rent rooms to a tenant and comes with fewer restrictions and paperwork.

Additionally, there is no effect on other reliefs and taxes such as Mortgage Interest Relief, Owner-Occupier Relief.  There will also be no capital gains exemption when you dispose of the residence.