There can be many benefits to being self-employed or running your own business. The flexible hours, being able to work from home. Holidays when and for how long you want them.
Of course, being your own boss also has its downside. It’s not just about making sure your business is profitable and being able to pay you a salary. You also need to think about your long-term plans as well. If you are self-employed you need to make your own pension provisions.
According to the Office for National Statistics (ONS) figures, just over, 15% of all workers are now self-employed. That’s nearly five million people.
The points below will help you think about what financial plans you need to make for your future.
Start a Pension
It’s never too late to start and if you’re self-employed you can choose between a personal pension, a stakeholder pension or a self-invested personal pension (SIPP). The differences being the investment choices available to help grow your savings pot, the level of charges you pay and the flexibility on how you can access your pension in retirement.
You can also save with the National Employment Savings Trust (NEST) if you’re self-employed or the sole director of a company that doesn’t employ anyone else. Whichever you choose, it’s a tax-efficient way to save for the future.
Our team of Financial Planners can help you work out how much you need to save and for how long.
The Pensions Advisory Service also provides some handy guides and tools, including information on how much you can save into a pension.
How much will your state pension be?
Anyone reaching state pension age today and has paid sufficient National Insurance Contributions will receive a State Pension when they retire. The amount you receive depends on your years of and type of contribution made. People are likely to need around two-thirds of their pre-retirement income for a comfortable retirement. The state pension may not get you as far as you’d like.
It’s also important to know the age you will qualify for the State Pension which you can check on the government website.
Be flexible with your finances.
Many self-employed people’s earnings vary from month-to-month. With this in mind, you may want to keep your finances flexible wherever possible. Individual Savings Accounts (ISA) can be a great complement to pension saving. Having instant access to some of your savings can be useful if your earnings can be unpredictable.
Currently, you can make tax-efficient savings of up £20,000 in an ISA. You can choose from stocks and shares ISAs, cash ISAs, or a combination of the two up to your annual limit.
Protect yourself and your family.
If you’re self-employed you won’t have some of the perks you would have enjoyed when being employed. Like sick pay, death in service or health insurance. So it’s worth considering what insurances you may need for yourself and your family. Private medical insurance can be expensive but if it can get you back to work sooner it could pay for itself.
Put money aside for your tax bill.
If you’re self-employed it is key that you put money aside to pay for your tax bill. There are a lot of tools and calculators available on the web to help you calculate how much you’ll need to set aside, including this calculator from the government.
A good tip is to save into a separate account weekly or monthly. This will stop you spending the money and you won’t feel out of pocket when it comes to making payments in July and January each year. Your accountant or bookkeeper should be able to help you with this.
The money you save into a pension may reduce your tax bill through tax relief. This means you could end up paying tax at a lower rate band.
How Anstee & Co can help you be self-employed.
If you are thinking about becoming self-employed or have been so for a while we can help. Our team of independent financial advisers can help you make the most of any tax allowance available to you. We will work with your existing accountant or bookkeeper when giving financial advice.
Being independent means that the financial advice we give is unbiased. Also, we look at all the financial options that are available to you from the “whole of market”.
The initial fact-finding meeting is at our cost and is without obligation. A meeting can be arranged at a time and location that is convenient for you. This may be at your home and at weekends. Why not arrange a meeting today? We have offices located at-
- Kettering, Northamptonshire
- Stamford, Lincolnshire
- London, Pall Mall, Greater London
Additionally, our financial planners live and make use of meeting rooms in-
- Bedford, Bedfordshire
- Market Harborough, Leicestershire
- Northampton, Wellingborough, Towcester and Brackley in Northamptonshire.