Setting your prices as a service business

The calculation

Four steps, and the third is where it usually goes wrong.

1. What you need per month to live on. After tax, including whatever you want to put aside.
2. Your costs as a business on top of that. Income Tax, PRSI and the Universal Social Charge, insurance, a pension, your phone, your software, your vehicle, your accountant. Those come off your turnover first, and the three charges are the ones people forget are a single bill.
3. Your billable hours. A forty-hour week rarely produces forty billable hours: winning work, writing quotes, admin, training and holiday all come off. Twenty to twenty-five is more realistic for many service businesses.
4. Divide what you need by those hours. That’s your floor. Not your price — your floor.

If that figure alarms you, you’ve learned something useful before you sent a quote. It usually doesn’t mean you’re too expensive; it means you were counting too many hours.

The year your tax bill arrives twice

One Irish detail belongs in the calculation rather than beside it, because it decides how much of every invoice you leave alone.

Under self-assessment you file and pay on one date: on or before 31 October in the year following the tax year. That payment does two things at once — the balance for last year, and preliminary tax for the year you are in. Preliminary tax is your own estimate of the Income Tax, PRSI and USC you expect to owe for the current year.

You are not free to estimate low. Revenue sets a floor: your preliminary tax must be at least the lowest of 90% of the tax due for that year, 100% of the tax due for the previous year, or 105% of the tax due for the year before that — and the last of those three only if you pay by direct debit. Underpay and you are charged interest per day.

The practical consequence is a year that catches people out. In your first year as a self-assessed taxpayer, preliminary tax may not be required at all, because 100% of a previous liability of nil is nil. So year one feels cheap and year two carries two years at once. If your pricing was built on how year one felt, year two is where it breaks.

First find out which rate your own work carries

Before any threshold, a question most pricing advice skips: Ireland does not have one VAT rate, and the one that applies to you is probably not the headline one. These are the rates in force from 1 January 2026:

• 23% — the standard rate. It “applies to most goods and services”, and Revenue’s own examples include consultancy services and solicitor services, so take professional and business work to be here unless you find your own trade listed below. Also building materials sold on their own, scaffolding (supply, hire and erection) and fittings.
• 13.5% — the reduced rate. This is the one that matters for the trades. Revenue lists “certain building services”, “repair services” and “cleaning and maintenance services (generally)”, and puts agricultural contractors here too.
• 9% — the second reduced rate. Periodicals, facilities for taking part in sport, heat pump heating systems, and electricity and heating gas (that last one for the period from 1 May 2022 to 31 December 2030). Plus, with effect from 1 July 2026, catering and restaurant supplies excluding alcohol and soft drinks, hot take-away food, and hairdressing services. Those three sat at 13.5% from 1 September 2023 until 30 June 2026, so a 2025 invoice and a 2026 invoice for the same haircut are not at the same rate.
• 4.8% — the livestock rate, which applies to livestock in general and to horses normally intended for use in the preparation of foodstuffs or in agricultural production. Greyhounds and other horses are not here; they are at 13.5%. There is also a separate flat-rate compensation percentage for unregistered farmers, 4.5% from 1 January 2026.

For construction the detail is worth reading rather than assuming. The reduced rate covers construction work generally, renovation and demolition, maintenance and repair of buildings, the installation of plumbing, heating and electrical services, and the supply and installation, maintenance and repair of fixtures. Garden sheds and greenhouses placed in a fixed position, ready-to-pour concrete and concrete blocks are in as well, subject to conditions.

What is not at 13.5%: building materials supplied on their own, scaffolding in every form, and fittings — supply, installation, or both together. Fixtures at 13.5% and fittings at 23% is a distinction that lives entirely in the invoice and nowhere in ordinary speech, and it is worth asking your accountant which side a given job falls on before you quote it.

Two further things sit at 9% rather than 13.5%: heat pump heating systems, and services relating to the construction of qualifying apartments until completed, with effect from 26 November 2025 to 31 December 2030.

Get this wrong in a quote to a private customer and you cannot quietly fix it later — the figure they agreed was the one with VAT in it.

The two-thirds rule, or how a materials-heavy job becomes a 23% job

Now the rule that turns the rate above into a pricing decision, and it has no equivalent in the United Kingdom, so advice written for that market will not mention it.

Revenue states it plainly, and all the figures are VAT-exclusive: “If the cost of the goods used in carrying out the work exceeds two-thirds of the total price, the rate which applies to the goods then applies to the entire transaction.” Stay under two-thirds and the rate of the service applies to the whole thing instead.

Read that again with your own jobs in mind. A repair where the parts cost more than two-thirds of the price is not a 13.5% job with some 23% materials in it — it is a 23% job from end to end, your labour included. Revenue’s own worked example is a guitar repair quoted at €300 plus VAT with €220 of materials in it: the VAT is €69, which is €300 at 23%.

That is a real lever and not a trick. If the materials on a job are heavy, you can look at whether the customer buys them directly, or whether the supply and the work are genuinely two contracts rather than one invoice split in half after the fact. Decide it before you quote, because the rate follows the structure of the deal and not your intention.

There are exceptions, and they are specific. The two-thirds rule does not apply to the repair and maintenance of motor vehicles and agricultural machinery, nor to construction services where the principal contractor accounts for the VAT, nor to construction services between two connected parties.

The VAT threshold, and the cliff on the other side of it

This is the pricing decision no spreadsheet warns you about. Below the registration threshold you generally do not have to register for VAT at all. From 1 January 2025 the thresholds are €42,500 for a business supplying services only and €85,000 for one supplying goods only. Mixed suppliers sit at €85,000 where 90% or more of turnover is from goods, and at €42,500 otherwise.

Being under it is not something you apply for. Since 2025 the exemption is the domestic layer of the EU VAT SME Scheme, and Revenue is explicit that it needs no paperwork: qualifying businesses “are not required to register for the domestic SME scheme”, it “will automatically apply to them and there are no reporting requirements”. You can still elect to register if you want to — some do, to reclaim VAT on a big purchase or because an invoice with VAT on it reads as more established.

The test is not a rolling twelve months. To stay in the scheme your annual turnover must not exceed the threshold in the current and the previous calendar year. And the obligation bites the moment you cross: you become an accountable person immediately on completing the transaction that takes you over, you must apply to Revenue within 30 days, and you are registered from the date of that transaction — not from the start of the next year. A business that has invoiced €41,000 of services by September and then takes a €2,000 job has crossed on that job.

The day you register, nothing about your work changes and your price to a private customer goes up by the rate your work carries — 13.5% or 23% — unless you absorb it out of your own margin. Neither is comfortable, and both arrive at a moment when you are busy.

Two things make it manageable. Know how close you are, counting calendar years and not your accounting period. And know who your customers are: if you sell mainly to VAT-registered businesses, registering costs them nothing, because they reclaim it — and you start reclaiming the VAT on your own costs, which until then you were paying in full with no way to get it back. If you sell mainly to households, it is a real price rise and you want it planned rather than sprung on you.

What you don’t do is turn work away to stay under. That is a decision about a tax threshold dressed up as a decision about your business. One footnote if you work across the border: the cross-border layer of the same scheme lets you use other member states’ thresholds instead of registering there, provided your EU-wide turnover stays at or below €100,000, and that one does need a separate application and quarterly reports.

If you work as a subcontractor, two things change at once

Anyone pricing work in construction, forestry or meat processing needs this before they quote, because it changes what lands in the bank and what appears on the invoice.

Relevant Contracts Tax. RCT is a withholding tax on certain payments by principal contractors to subcontractors in those three industries, and the rates are 0%, 20% and 35%. The principal deducts it and pays it over to Revenue; it is a payment on account of your own tax, not an extra tax, but it is money you do not hold in the meantime. Your rate is not a reflection of your work, it is a reflection of your compliance record, and it is worth knowing which one you are on before you build a cash-flow plan around a job. If RCT is deducted, it is calculated on the VAT-exclusive amount.

The VAT reverse charge. Where RCT applies to construction services supplied by a subcontractor to a principal contractor, the VAT goes the other way: you do not charge it. Your invoice looks like a VAT invoice without the rate and the amount, it carries your own VAT registration number, and it must contain the statement “VAT on this supply to be accounted for by the principal contractor”. The principal then accounts for the VAT as if they had made the supply. The same applies between two connected persons.

So on a €10,000 job for a principal contractor, you invoice €10,000 with no VAT, and you may be paid €8,000 with €2,000 withheld under RCT at 20%. Neither number is a discount, and neither is a reason to price higher — but a quote that was mentally built on “€10,000 plus VAT, paid in full” is a quote built on the wrong arithmetic. Note too that the two-thirds rule does not apply to these supplies at all.

One more point that catches new principals rather than subcontractors: if you are the one engaging subcontractors and operating RCT, you must register and account for VAT irrespective of your turnover. The thresholds above do not help you.

Day rate or project price

A day or hourly rate is fair and easy to explain, and it has one problem: it rewards working slowly. Get better and you earn less for the same result.

A project price solves that and moves the risk to you. If it overruns, that’s your bill. It works well for work you know and badly for work whose size is still unclear.

A practical middle: a project price with a clear line around what’s included, and an hourly rate for everything outside it. Put that line in the quote, not in a later conversation — it is exactly the kind of agreement that otherwise gets reopened after the fact. What else belongs in there is in the piece on writing a quote.

What to say when someone says you’re expensive

“That’s expensive” is rarely the end of a conversation. It’s almost always a question in disguise: “why does this cost so much?”

The worst answer is to drop your price straight away. You’ve then confirmed that it was negotiable, and the next quote starts lower. The second worst is to defend it with your costs — those are your problem, not theirs.

What does work is asking back: “Compared with what?” Sometimes it turns out they’re comparing a quote with half the work missing. Sometimes their budget really is lower, and then you can look at whether there’s a smaller job that fits. And sometimes they say it because that’s what you say.

Make it smaller rather than cheaper

If the budget genuinely doesn’t fit, reduce the scope rather than the rate. Take something out of the job instead of discounting all of it.

That isn’t a trick, it’s a real difference. A discount says your price was too high. A smaller job says your price is right and there’s less work being done — and on the next enquiry you’re back at your own rate.

On a materials-heavy job this has a second effect worth knowing about. Shrinking the labour while the parts stay the same can push the cost of the goods past two-thirds of the price, and take the whole invoice to 23%. Smaller is usually the right answer; just check which side of the line it lands on.

When to put your prices up

Two signals. You say yes too often because you’re busy enough and still not left with anything. Or you win almost every quote — in which case you’re probably under.

Do it with new customers first, and with existing ones by giving plenty of notice. Record your rates per customer in your system, so you can see later who’s still on the old figure. That’s exactly the kind of thing you won’t remember in two years’ time — and the same list tells you how far into the calendar year you are against €42,500.

If getting paid is the other half of the problem, that’s in the piece on payment terms and late payers.