Managing your money as a freelancer or contractor
Research carried out by the Small Business Research Centre at Kingston University revealed there are an estimated 1.9 million freelancers in the UK, representing 36% growth over the past eight years.
Almost two thirds of all freelancers work in four main industry groups:
- Education, health and social work (21%)
- Professional, scientific and technical (20%)
- Arts, entertainment and recreation (12%)
- Information and communication (10%)
In terms of age profile, 25% of freelancers are aged 40 - 49 compared to 21% aged 60 and over. However, inadequate pension provision and increases in the State Pension Age would suggest this will change and more over 60s will choose to set up as freelance in order to supplement their ‘retirement’ income.
Self-employment attractive to many
Freelancers, consultants and contractors are often self-employed and make a significant contribution to the UK economy. In fact, the latest labour force figures from the Office for National Statistics show a record 4.79 million, 15.1% of the workforce, are self-employed.
Self-employment is attractive to many people because of the flexibility it offers, however, it shouldn’t be considered an easy option. Self-employed people will worry about a lack of clients – or too many clients – and uncertainty over where the next contract is coming from. They also have to create their own marketing and find new business, and manage their finances, including tax, National Insurance and pension contributions.
Protect your earnings
Even if you’ve been successfully self-employed for years there may be times when the phone stops ringing and the work slows down. Households in the UK have on average 18 days until their savings run out and they could be on the breadline financially unless they have another income to rely on. An Income Protection policy provides an important safety net in this situation and will provide you and your family with a replacement income if you’re unable to work due to illness or injury.
Save for your retirement
If you’re self-employed, you may find that saving into a pension can be a more difficult habit to develop than it is for people in permanent employment. There will be no employer contributions and irregular income patterns can make regular saving difficult; but planning for retirement is crucial if you want to be able to relax and enjoy it when the time comes.
If you are self-employed, freelance or contractor and would like advice on how best to manage your money and plan for retirement, please get in touch.
For any financial advice contact KBA on 01942 265866.