This post is in collaboration with Sherpa
If you run your own business from home or work as a freelancer, you’ll know that there are many pros and cons of working for yourself rather than as an employee. There can be so much to organise, it’s easy to forget to organise things that would always have been sorted for you by an employer previously.
I’ve listed below three important things freelancers forget to organise when setting up on their own..
When you work for someone else you’ll receive sick pay, and even though we don’t like to think about it, usually death in service payouts as well. But if you work for yourself, what happens if you can’t work? How would you pay your mortgage if you became seriously ill and were unable to work for a while?
Income protection insurance is something freelancers are strongly advised to get when they start working for themselves. You always need to ensure you have a contingency plan in place should things not quite go to plan.
It’s a good idea to find a company specialising in self-employed insurance for freelancers, contractors, and other self-employed individuals so you can be confident that they understand what you need. Sherpa provides ideal insurance for self-employed mums. They operate on a monthly subscription basis meaning you can change your requirements as your business grows.
Once you have freelancer insurance in place it will be a big weight off your mind.
All employers must now have workplace pension schemes in place, paying monthly contributions to boost the amount their employees save towards retirement.
If you’re self-employed you won’t have this help and a pension is something you will need to sort out for yourself. If you haven’t sorted anything out yet you’re not alone – 45% of self-employed workers between ages 35 – 55 have no private pension in place.
It can be hard to be disciplined enough to make regular payments into a private pension, but even if you still feel like retirement is a long way away, it’s important to start as soon as possible. It’s advisable to set up a private pension for yourself rather than simply using an ISA or savings account that you could be tempted to dip into.
Whilst you won’t have an employer make monthly contributions, you will get tax relief on your own contributions. If you’re a basic-rate taxpayer, for every £100 you pay into your pension, the government will add an extra £25. If you’re a higher rate taxpayer you can claim back a further £25 for every £100 you pay in through your tax return.
If you sort your pension now and make regular payments you will thank yourself later on!
3. Tax deductions
When you’re employed, someone else foots the bill for equipment and you can usually claim expenses back for any travel.
If you’re self-employed you will have to pay the costs of running your business yourself, but you can deduct some things from your tax bill as long as they’re what’s called ‘allowable expenses’. You will then only pay tax on the remaining profit.
Allowable expenses include things like stationery and phone bills, as well as less obvious expenses such as insurance, bank charges, heating and costs of running your website.
If you use something for both business and personal use, such as a mobile phone, you can only claim back the portion used for business.
Keep track of all expenses so that when it comes to submitting your self-assessment return, you know that you haven’t forgotten anything.
If you are self-employed, have you got these three things covered already? If not, will you be adding them to your to-do list?