Being self – employed can be a wonderful experience. You can work flexibly, be your own boss, follow your own instincts and use your skills to the full. When it works really well you can also make more money than you could being employed and get full credit for your ideas.
You also need to remember that sometimes the reason you get paid more is that the full responsibility for employment benefits lies with you.
The perks employees take for granted are often in addition to state benefits, such as holiday entitlement at full pay and paid sick leave. Potentially at executive level there may be additional benefits such as Death In Service Insurance and Private Medical Insurance. Following Auto Enrolment of pensions, all employees receive contributions from their employer in addition to their own contributions. When you go it alone you forgo all this.
So with the freedom comes additional risk and responsibility, there is always a trade-off. Here are our top tips to ensure you don’t leave yourself short.
1. If you can’t afford anything else at least make sure you have some form of income protection in case you can’t work. If you have a family and the mortgage must be paid it’s unlikely state benefits will be enough
2. Make sure you keep up with your NI contributions. If there are any gaps it may be possible to fill them if they are recent enough. Do a state pension forecast NOW and make sure you are eligible. By return on investment the State Pension is excellent.
3. Don’t rely on selling your business as your pension, this rarely pans out and creates uncertainty and a lack of control. Much better to make investments as you go along. Pensions are an excellent tax efficient way to save and can help keep your tax bills down as well.
4. Don’t save money on accountancy. By all means keep your own records but at the very least get your year end and tax calculations done professionally. There may be opportunities to save money you might miss and if there is a problem it will certainly cost you more in the long run.
5. If your business takes off and you are lucky enough to grow to employ more staff, don’t forget about the hidden costs of all the benefits I mentioned in the first paragraph. NI, Pensions, holiday and sick pay will all add to the cost.
Here at FMB our team advise small business owners all over Cumbria to ensure they are on track without the safety net of a big employer. We also know some great accountants like Matthew Ellwood of MBE Accountancy in Windermere who helped me write this blog!
Contact us today for a chat.
Ruth and Matthew
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