How to secure your financial future if you’re self employed

As well as withdrawing your money whenever you want, you can also keep your money invested for as little or as long as you like although if you’re investing in stocks and shares, you should generally be planning to keep your money invested for five years or more. Greater long-term benefits to ISAs include a new inheritable ISA allowance, meaning that a surviving spouse or civil partner will get an increase in their ISA allowance of an amount equal to the value of their spouses or civil partners should they die.

4) Protect yourself and your loved ones

If you’re self-employed, you won’t have access to some of the protections which come as standard if you’re working for a company, like sick pay, or the additional benefits, things like death in service benefit or health insurance, which can come as part of the package. So it’s worth considering what protections you need to put in place for yourself.

For instance, death in service benefit is a sum which is commonly a multiple of annual salary that is paid as a lump sum to the family of an employee should the worst happen. Without this from your employer, it may make sense to put equivalent life insurance cover in place so loved ones are supported.

5) Get smart about tax

One of the biggest challenges for the self-employed is making sure you have your income tax arrangements in place and have put money aside to pay your tax bill. There are lot of tools and calculators available on the web to help you calculate how much youll need to put aside, including this one from the Government.

A good tip is to set up a separate account and set aside money on a regular basis this will stop you spending the money and you won’t feel out of pocket when it comes time to make the twice yearly payments in July and January.

One of the benefits to pensions is that what you save into a pension can reduce your tax bill. This happens because of the way tax relief works, and you end up paying more tax at 20 per cent instead of 40 per cent, for example.

You can save as much as you like towards your pension each year, but theres a limit on the amount that will get tax relief. The maximum amount of pension savings that benefit from tax relief each year is called the annual allowance. The annual allowance for 2015-16 is 40,000.

If like many self-employed workers your income varies significantly from year to year, unused allowances can allow you to maximise your pension savings in years when your income is high. Speaking to an expert will keep you on track here, as it can be complicated to work out how much of your allowance is unused.

Related Article: Working for someone on a self employed basis

Julie Hutchinson is Standard Lifesconsumer finance expert.

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