Planning for the Future as a Contractor
Retirement seems like a long way off when you’re hard at work building your business, but it’s never too early to start preparing your money for the future. Saving for retirement is an important life decision which you will undoubtedly consider throughout your working career. Recent data from Demos has revealed that contractors and freelancers aren’t saving for the future and only 17% of respondents surveyed reportedly have a plan.
At SJD Accountancy, we personally believe it’s in a contractor’s best interests to be aware of the options available when it comes to planning for the future. Below we’ve put together some simple ways to help you start thinking about money and planning for the future.
Set up your pension as soon as possible
If you haven’t already, it’s important that you make this your priority. With no employer to top up your contributions, as a contractor or freelancer you will be responsible for the bulk of your savings.
As the sole director of your limited company, you can either pay your pension through your personal or business account. If you make contributions through your company, this will be classed as an employer contribution and can be claimed as a legitimate business expense.
Contracting through your limited company is arguably the best way to operate and there are many reasons to support this. Just one of the ways you can increase your tax efficiency is to contribute to your pension through your company.
The annual allowance for pension contributions for which you can claim tax relief is currently set at £40,000 or 100% of your earnings per year (depending on which is lower). You can also carry forward any unused allowances for the past 3 years to make the most of this relief.
Take control of your savings
Keeping your spending in check month on month and being aware of what’s going in and out of your account can make a big difference to your financial position over time. If you’re new to the industry and your earnings differ wildly, committing to a small monthly amount could be the safest way of keeping you on track without being out of pocket in the short term. To find out more, try our savings calculator.
Protect yourself with insurance
This may cost you more in the interim but can be invaluable in the event that something were to go wrong. Some accountancy packages will also offer insurance packages at no extra charge. You can find out more here.
Take control of your finances
Just as your circumstances are unique, your pension plan which will suit you best the Our expert accountants can help you explore your options and find the right pension for you. To find out more, give us a call on 01442 330760 or drop us a message.