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Regency House, 45-51 Chorley New Road, Bolton, BL1 4QR
Cardwell Management Services UK Limited
Regency House, 45-51 Chorley New Road, Bolton, BL1 4QR
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Just4contractors.com > New to Contracting > Managing Your Finances
What do I need to consider financially?
As a contractor, you have the opportunity to earn more than as an employee. This also comes with additional responsibilities.
Freelancing can be unstable and rates are determined by market forces. If you are self employed, you should have a high interest savings account into which you save a percentage of your gross income monthly to meet your tax liabilities in January and July each year.
Every contractor needs a buffer. You must use your income to build up a cash reserve fund in your company that will be sufficient enough to cover your living expenses for at least six months. If you use the company money for non-allowable expenses, it will be subject to tax (in the case of dividends) or tax and NICs (in the case of salary). You must always budget for these costs since HMRC expects to be paid on time. Late fees and penalties will just add up to more non-allowable business expenses.
There will be instances when your company may not be generating income yet you still have to pay VAT as well as other business expenses such as phone bills, insurance, accountancy fees. By building up a cash buffer you will protect yourself against these inevitable breaks. By taking out a Permanent Health Insurance you are protecting yourself against being unable to work for longer periods of time due to ill health.
As a contractor, you are responsible for your own retirement. You must set up a pension vehicle for yourself since you are no longer a part of any corporate pension scheme unlike when you were an employee. Being a director of your own company, you have more options of planning for your retirement than a standard employee. If you wish to obtain advise about a pension or retirement plan, you should use an independent Financial Adviser.
See Also
Insurances
Partner IFAs
Recommended Links:
Find an Independent Financial Adviser
Pensions Tax Simplification
Freelancing can be unstable and rates are determined by market forces. If you are self employed, you should have a high interest savings account into which you save a percentage of your gross income monthly to meet your tax liabilities in January and July each year.
Every contractor needs a buffer. You must use your income to build up a cash reserve fund in your company that will be sufficient enough to cover your living expenses for at least six months. If you use the company money for non-allowable expenses, it will be subject to tax (in the case of dividends) or tax and NICs (in the case of salary). You must always budget for these costs since HMRC expects to be paid on time. Late fees and penalties will just add up to more non-allowable business expenses.
There will be instances when your company may not be generating income yet you still have to pay VAT as well as other business expenses such as phone bills, insurance, accountancy fees. By building up a cash buffer you will protect yourself against these inevitable breaks. By taking out a Permanent Health Insurance you are protecting yourself against being unable to work for longer periods of time due to ill health.
As a contractor, you are responsible for your own retirement. You must set up a pension vehicle for yourself since you are no longer a part of any corporate pension scheme unlike when you were an employee. Being a director of your own company, you have more options of planning for your retirement than a standard employee. If you wish to obtain advise about a pension or retirement plan, you should use an independent Financial Adviser.
See Also
Insurances
Partner IFAs
Recommended Links:
Find an Independent Financial Adviser
Pensions Tax Simplification
