Self employed and screwed

Expert / 25 July, 2018 / Miss Lolly

Self Employed & Screwed! Tax Advice for The Self Employed Mama

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

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