Business freedoms

By 15th February 2019Louise's Column
Self-employment enables you to exercise your sense of freedom in business decision-making and to choose your own business path. There are many benefits to becoming a self-employed freelancer or running your own business: the flexible hours, the option to work from home, no fixed holiday allowance, and, of course, being your own boss. But it’s vital to remember that there is no sick pay, life insurance or pension scheme benefits, unless you arrange to put these schemes in place yourself.

Seriously missing out
The Government’s compulsory pension auto-enrolment initiative introduced in 2012 now means that most people working for a company will have been automatically enrolled in a workplace pension by 2018. But, if you’re self-employed, you could be seriously missing out.

If you are currently self-employed, or you’re contemplating it, making self-employment work for you is not just about making sure your business is profitable enough to pay you a salary. You also need to think about your long-term future.

Enjoy your retirement
The State Pension alone is unlikely to provide you with enough income to enjoy the retirement you want. So, it makes sense to invest in a personal pension, with which you choose where you want your contributions to be invested from a range of funds offered by the provider.

The earlier you start, the better. It gives you more time to contribute to your savings before retirement, more time to benefit from tax relief, and more time for your savings to grow. We can assist you to take the right steps to secure your financial future whilst you focus on your business.

Freedom and control
Self-employed people tend to use a personal pension to save for their retirement. It gives the option to choose where contributions are invested and the provider usually offering a range of different funds.

These plans qualify savers for tax relief on their contributions at their highest marginal rate of Income Tax, so a £1,000 contribution will cost only £800 and £600 for basic-rate and higher-rate taxpayers respectively. They come in different forms, from simple stakeholder pensions to self-invested personal pensions (SIPPs), offering greater investment freedom and control.

National Insurance record
There’s no limit to the amount you can pay in to your pension fund each year, but there is a limit to the tax relief that can be claimed on your contributions. The current 2018/19 maximum annual allowance is £40,000, or if your salary is lower than that, it’s 100% of your salary. Any amounts over and above that don’t qualify for tax relief.

Don’t forget, you’re entitled to the State Pension in the same way that employed people are. The level of the payments you receive will depend on your National Insurance (NI) record. You can top up your contributions if you are falling behind to ensure you don’t miss out. In tax year 2018/19, the full level of State Pension is £164.35 a week.

Future income uncertainty
One concern for some self-employed workers, who may lack certainty about their future income, is tying up savings on which they may need to fall back. An option to consider is an Individual Savings Account (ISA). An ISA lets you earn interest without paying any income tax on the proceeds withdrawn.

You have an ISA allowance in the UK every tax year, which lets you save or invest money up to a certain amount without paying tax on your returns. Your ISA allowance for this tax year is £20,000. The tax year runs from 6 April to 5 April the following year. In addition, you do not have to declare either gains or income in a Stocks & Shares ISA, or interest in a Cash ISA, on your tax return.

A PENSION IS A LONG-TERM INVESTMENT.

THE FUND VALUE MAY FLUCTUATE AND CAN GO DOWN, WHICH WOULD HAVE AN IMPACT ON THE LEVEL OF PENSION BENEFITS AVAILABLE.

PENSIONS ARE NOT NORMALLY ACCESSIBLE UNTIL AGE 55. YOUR PENSION INCOME COULD ALSO BE AFFECTED BY INTEREST RATES AT THE TIME YOU TAKE YOUR BENEFITS. THE TAX IMPLICATIONS OF PENSION WITHDRAWALS WILL BE BASED ON YOUR INDIVIDUAL CIRCUMSTANCES, TAX LEGISLATION AND REGULATION, WHICH ARE SUBJECT TO CHANGE IN THE FUTURE.

THE VALUE OF INVESTMENTS AND INCOME FROM THEM MAY GO DOWN. YOU MAY NOT GET BACK THE ORIGINAL AMOUNT INVESTED.

PAST PERFORMANCE IS NOT A RELIABLE INDICATOR OF FUTURE PERFORMANCE.