Planning for your future when you’re self-employed

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Morgan Laing

May 23, 2023

3 mins read

Planning is key to help you achieve the life you want in future. And if you’re self-employed, here are a few steps you can take to get your finances ready for the years ahead.

Get your self-assessment tax return in on time

If you’re self-employed, it’s likely you’ll need to fill out a self-assessment tax return each tax year so the government knows how much you owe in tax and National Insurance (NI).

There can be fines if you file your tax return late or don’t pay your tax bill on time. Meeting your deadlines could mean you have a bit more money in your pocket to put towards your future, since you’ll be avoiding penalties.

And don’t forget, paying NI could ensure you’re eligible for certain benefits. For example, getting your tax return in and reporting correct figures can be important for making sure you’ll have access to the State Pension when you reach State Pension age. This is currently 66 and rising to 67 by 2028.

Some self-employed people don’t pay NI through self-assessment because they have specific jobs or because they have low profits (below £6,725 per year). If this is the case for you, you might want to consider making voluntary NI contributions to help make sure you have access to the State Pension in the future. To understand if you’d benefit from this, get in touch with the Future Pension Centre (if you’re under State Pension age) or the Pension Service (if you’re over State Pension age). 

Think about how much you’ll need

Whether you’re employed or self-employed, a big part of planning for the future is understanding how much money you might need for the lifestyle you want once you stop working.

The Retirement Living Standards – published by the Pensions and Lifetime Savings Association – can give you an idea of how much you might need. You can also use our retirement tool to see how much you could need to fund the retirement lifestyle you want.

Once you have a number in mind, it may be easier to figure out how much money to put towards your future. In other words, it could give you a goal to work towards.

Save into a pension plan

You can still save into a pension plan when you’re self-employed – you just won’t have an employer to automatically enrol you into one. You can usually access your pension savings from the age of 55 (due to rise to 57 from 6 April 2028).

Paying into a pension plan can be a great way to save for your future. Firstly, the money you pay into your plan is invested, meaning it could have the potential to grow over time. The longer your money’s invested, the more opportunity there is for your pension pot’s value to increase. But remember, a pension is an investment. Its value can go down as well as up and could be worth less than was paid in.

And your pension plan can benefit your loved ones too. If there’s money left in your pot when you die, this usually falls outside of your ‘taxable estate’. So if you want to pass your pot onto your family, they normally won’t have to pay inheritance tax on it. 

Another huge plus-point of a pension plan is that you’ll usually get tax benefits, like tax relief. Tax relief essentially means the government gives your pot a boost. For more information on how it works, read our pension tax relief article.

Plan where to put your money

Unlike many of those who work for other people, you may not get a regular salary. You might be very successful at what you do, but there’s always a chance that your profits could fluctuate. So planning where you put your money could be helpful.

For example, for unexpected costs further down the line and for short-term goals, it might be helpful to put some money away into something like an easy-access savings account. So if profits are down one month in future but you need to make an emergency home repair, for instance, you have money set aside to cover that.

And when it comes to your long-term future, you might want to think about setting up a pension plan. When you stop working and are no longer earning, a pension plan could help you afford your life in retirement.

How do I start saving into a Standard Life pension plan?

Self-employed and want to start saving for your future? Our personal pension plan could be right for you. It offers lots of flexibility – you can start, stop or change your pension payments at any time, and we’ll automatically add tax relief for you at the basic rate of 20%. 

And you can begin to save for the life you want in a matter of minutes. 

The information here is based on our understanding in May 2023 and shouldn’t be taken as financial advice.

A pension is an investment and its value can go down as well as up and may be worth less than was paid in.

Your own personal circumstances, including where you live in the UK, will have an impact on the tax you pay. Laws and tax rules may change in the future.

Standard Life accepts no responsibility for information in external websites. These are provided for general information.

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