Self-employment can have huge advantages around working flexibility and potentially higher earnings than you would if you are employed in a traditional 9-5. Entrepreneurs are notorious for throwing themselves into their business and often forgetting that they need to think about themselves as the employee of their business too. There is no point in slogging your guts out as a business woman only to have missed the bit where you feather your financial nest for later on.

Put away for a rainy day

What happens if you get sick – i.e. is there an  income protection policy  in place? What about when retirement – i.e. are you putting money away for tomorrow (a pension) or keeping their fingers crossed?

Recent research reported in Professional Adviser suggests that 45% of self-employed people do not have a pension.

Here’s what I tell my clients

I would also say that in my day job at a wealth management firm that even really successful entrepreneurs have remained ostriches when it comes to pension planning. When I  explain to them the tax advantages they 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
  • 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 take the decision out of it by setting up a direct debit from your business account so that the money is out of sight
  • You can touch it at age 55 – even if you are still working
  • You can pass your pension on when you die

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!!!

Let’s talk benefits

So here is your homework. Write a list of the benefits that your business should be providing you with. If you feel that the business can’t afford it, this is probably an indication that you need to put your rates up and rethink your charging model.

Want to learn more?

I will be running a money workshop with Found & Flourish on the 1st August where I will be coaching you through all of the above and more!

You will learn:

  • How to be financially savvy
  • Pension planning and pension schemes
  • Tax relief, what it is and how to benefit from it
  • Why financial health matters
  • How to set financial goals

By the end of this workshop, you will have a better understanding of how to get the most out of your business including tax advantages and tax relief, pension planning, financial goal setting and more.

Looking forward to seeing some of you there!

About the author

Lisa Conway-Hughes is a qualified Financial Advisor with fifteen years of experience and a Fellow of the Personal Finance Society. She also blogs and speaks publicly on financial issues. After 8 years as a financial adviser, Lisa realised that most households, no matter what their income, face very similar dilemmas when it comes to money.

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