Self Employed & Screwed! Tax Advice for The Self Employed

Self-employment can have serious pros for working mums when it comes to flexibility. People often set up as self employed with heady ambitions of earning loads and working less compared to their previous 9-5ers.

Entrepreneurs are notorious for putting their business first whilst forgetting about their personal financial goals and the bigger picture. What happens to them if they cant work due to illness – is there an income protection policy in place? What about when they come to retire – i.e. are they squirrelling money away for the future (a pension) or not even thinking about it?

It was reported recently in Professional Adviser that 45% of the self-employed don’t have a pension.

In my at a wealth management firm I often meet really successful entrepreneurs who have done well in every aspect except that they have remained ostriches when it comes to pension planning. When I explain to them the tax advantages they really kick themselves. So here’s what I tell them:

  • It is a very powerful and tax efficient savings tool – and yes the earlier that you start the more you are going to benefit from compounding growth
  • Tax relief, tax relief, tax relief!! Basic rate tax payers pay in £80 and the government tops it up to £100. Plus it gets even better for higher rate tax payers (they pay in £60) and higher rate tax payers (they pay in £55)
  • You can automate it by setting up a direct debit from your business account so that the money is out of sight. Most pension providers are also flexible to if you need to adjust the amount you pay, you can usually do so if you give a week or two’s notice.
  • You can touch it at age 55 – even if you are still working
  • You can pass your pension on when you die without inheritance tax
  • If you have saved well, you can even use your pension pot to help you purchase a commercial property for your business if that’s what floats your boat.

So hopefully this has encouraged you to take the leap if you haven’t already got this sorted. If you already have a pension, perhaps it’s time to review how much you are paying into your pension and how it is invested.

Did you know, a very rough rule of thumb is that you should pay in half your age as a percentage of your income. For example if you are 44, you should pay in 22% of your salary each month into your pension. EEKKK!!!

Lots of Love

Miss Lolly xx

About The Author

Miss Lolly
Financial Adviser

After 8 years in her profession, the financial adviser behind Miss Lolly realised that most households, no matter what their income, face very similar dilemmas when it comes to money. Everyone wants the “good night’s sleep” that comes with knowing that everything is on track but very few actually take action and put a plan in place and seek good, regular advice. The main barrier is fear! Fear of not understanding, fear of not having enough money and most importantly fear of opening your eyes to the current financial situation. “The motivation to set up Miss Lolly came when I fell pregnant and started to think more seriously about my own financial future. I realised how lucky I am to have the knowledge and tools to put in place everything I need to ensure that my new family will be financially secure. I also noticed that a few hints and tips are all most clients need to restore their confidence to tackle their day to day finances by themselves. When helping clients with their financial foundations, I was being asked very similar questions, so thought it would be useful to share some of the advice that I give them.” By day Miss Lolly is a financial adviser at a wealth management firm in the City of London. She is a Chartered Independent Financial Adviser and also a Fellow of the Personal Finance Society (PFS). This is the highest qualification a financial adviser can hold and less than 2% of PFS members have reached this. Miss Lolly is also a member of MENSA – the high IQ Society with an IQ of 148. In her spare time, Miss Lolly enjoys socialising with her friends, trying out new restaurants, keeping fit and playing Sudoku. She lives in South West London with her husband and is the proud mum of two children.

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