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Flexible Working Is Built On Sound Financial Planning

Posted on Posted in Life Insurance, Money, Mortgages, Pensions

The traditional job may be on the way out.  Since the global recession, there has been a surge in contracting  – the gig economy – where work is a contract that lasts a year or two, or perhaps just a few months.

Not so long ago, the only people who worked gigs were musicians, but in fact, many creative industries – film, advertising – always worked this way.  Now the freelancer and the consultant have become mainstream, and the short term contract or gig is seen by banks, government authorities, industry and local government as the best way to provide skills for a particular project.

Around five million UK workers are already in self-employment.  One in five earn up to £1,500 a week, while in some sectors it’s possible to earn as much as £5,000 per week. In those areas such as technology where specialist skills are always in demand, the gig could well become the norm.

Contractors rates can look very appealing, compared with a PAYE salary, and there is a greater flexibility with new technologies allowing workers to log into networks from the other side of the world. They can set their own hours, and work on the projects, and with the companies that interest them. Success in  this new world of work demands sound financial planning.

Financial planning for your business

You’ll need to register as self employed with HMRC and sorting out your own National Insurance contributions. Most contractors are better off working through their own limited company. Setting one up is not difficult, but you may need help to find the best way for your particular circumstances.

Most small businesses take out public liability insurance. It will protect you if a third party injures themselves, or damage is caused to property because of your business activities. If you provide professional services or advice to clients, you should also consider getting insured for professional indemnity.

If you employ anyone else, you must take out employer’s liability insurance. You will need cover of at least £5 million and you must display your certificate of insurance where employees can easily read it

Financial planning for yourself and your family

The biggest downside for most people attracted to the word of contracting is that services and protection taken for granted as an employee are simply no longer there.

Contractors do not receive health insurance, paid holidays, pension plans, or other benefits.  Taking a day off sick means lost earnings. The absence of a monthly salary can make it difficult to get an ordinary mortgage, and other forms of credit can be more difficult to obtain.

You need to replace the security taken for granted with traditional employers.

Health cover

If you can’t work, you can’t earn. Private health insurance could help you bypass queues and get treatment – and hence back to work – faster.

Income cover

Income protection insurance is a sensible precaution. There are many types of cover available but you should think about cover which could replace an income – either for a few months, or possibly permanently, if you became sick or injured and were unable to work.

Protection for your family

Having protection for the family is also vital. Life assurance, and a sensible approach to savings to cover the weeks when the work isn’t there are both essential.

Think about the future

But perhaps most important of all is the need to start planning for the future. Every employee can look forward to an auto-enrolled workplace pension as well as a state pension. As a contractor, you will have no such luxury.

A retirement plan is essential. You’ll need to find a pension plan which can accommodate payments that may sometimes need to be sporadic.

Getting help

If you are considering becoming a contractor or self employed, contact us to discuss a financial review. We can help you through the necessary steps and help you get the protection you need in place.

Click here to read our recent blog “How The Rich Get Richer

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The Financial Conduct Authority does not regulate taxation and trust advice.

Levels and bases of reliefs from taxation are subject to change.