Guide to Freelancing - PCG

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As a freelancer, your lifestyle will be quite variable. You may end up working abroad and could even retire overseas. You can use your company‟s surplus funds to save for your retirement. To do this, simply leave the money in the company by using a corporate savings account. However, growth rates are unlikely to keep pace with inflation, and this is far less tax efficient than company pension contributions (see the PCG Guide to Pensions for an explanation on how your company can make pension contributions on your behalf and claim them as an allowable business expense). WRAPs and Self-Invested Personal Pension Plans (SIPPs) WRAP is an investment concept that originated in Australia. The idea is that the client has investment freedom and can hold other assets on the platform, such as Individual Savings Accounts (ISAs), Unit Trusts, Bonds, etc. Typically, fund performance can be monitored online. Holding all assets on one platform greatly reduces the effect of charges and allows movement between the different asset classes, without the need to disinvest. Typically, a contractor would work with a Financial Planner when using a WRAP. A SIPP is a personal pension with a wide choice of investments. It lets you choose from a wide range of funds and other investments. You can hold individual stocks and shares in a SIPP should you wish. The SIPP wrapper provides the tax advantages and legal framework for your collection of investments for retirement. What you hold within the SIPP wrapper is up to you. You are able to choose and switch between a wide selection of funds and permitted investment types. With a stakeholder and many personal pensions you can choose only from a limited selection of investment funds. SIPPs and WRAP allow an enormous range of investment options to be exploited for those with the desire, time and confidence to manage their assets individually. Alternatively a professional adviser can help with some ground rules, asset allocation strategies and guidance. SEEKING FINANCIAL ADVICE If you wish to obtain advice about a pension or retirement planning, you should use an Independent Financial Adviser. It is usually best to work with a fee based, rather than commission based adviser. You can find an IFA close to where you live through the www.unbiased.co.uk website. Check that the adviser has the G60 or J04/J05 pension qualification if you want someone that has specialist advice. Ensure that the adviser understands the rules on company contributions to pensions. PCG is affiliated with Wealth Matters (www.wealth-matters.co.uk) who have been providing pension advice to PCG contractors for over six years. MORTGAGES FOR FREELANCERS The fear of not being able to get a mortgage is often a reason people cite for not going freelance. Indeed most online mortgage providers are geared towards employed workers. The challenge is that often high street-lenders don‟t understand how freelancers work or fail to appreciate that your accounts will not necessarily reflect your full capacity to re-pay a mortgage. It‟s well worth trying an Independent Financial Advisor (IFA) which specialises in freelance or contract working. They should be able to help secure you a competitive fixed or variable rate mortgage at „up to four times your contractor rate‟ with high-street lenders. In addition, you may not be charged a broker fee. ContractorFinancials, for example, has been able to negotiate underwriting that works from a multiple of your hourly/daily rate rather than using your last three years‟ accounts. A list of PCG affiliates specialising in mortgages are contained in the supplier directory at www.pcg.org.uk Copyright PCG September 2011 Guide to Freelancing Version 7.0 74
6 Risk prevention This section covers: 18. Assessing risk Tools to prevent or mitigate financial meltdown and other disasters 19. Compulsory insurance When you are legally obliged to take out insurance 20. Recommended insurance Insurance policies that should be seriously considered by most freelancers/contractors 21. Worth considering Insurances for those who want comprehensive cover against all risks Copyright PCG September 2011 Guide to Freelancing Version 7.0 75
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SECTION 1: INTRODUCTION 1. About th
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SECTION 1 Introduction This section
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“I can‟t tell you how much admi
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THE FREELANCE CHECKLIST Time estima
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FREELANCE CHECKLIST CONTINUED... Ti
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Once you go freelance, you enter a
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What the IR35 Intermediaries legisl
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Specify your working relationship b
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Although it‟s perfectly possible
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• The registered office is the co
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Comparison between dividend and cap
Page 25 and 26: PARTNERSHIPS A partnership is a sim
Page 27 and 28: UMBRELLA COMPANY An umbrella compan
Page 29 and 30: SECTION 3 THE BOOKS This section co
Page 31 and 32: Do they come well recommended? If p
Page 33 and 34: KEEPING RECORDS What records should
Page 35 and 36: GET A BUSINESS BANK ACCOUNT Before
Page 37 and 38: Invoicing clients outside the UK If
Page 39 and 40: Debt collection top tips Be courteo
Page 41 and 42: 5. Pay all three taxes (PAYE, Emplo
Page 43 and 44: HOW TO PAY BILLS AND EXPENSES When
Page 45 and 46: Travel If you run a limited company
Page 47 and 48: SECTION 4 Paying the taxman This se
Page 49 and 50: WAYS OF ACCOUNTING FOR VAT Cash acc
Page 51 and 52: You can deduct one percent off the
Page 53 and 54: Upper Earnings Limit (UEL): £817 p
Page 55 and 56: Sole traders, partners and members
Page 57 and 58: SECTION 5 Running the show This sec
Page 59 and 60: 10 Top tips from experienced home w
Page 61 and 62: WORKING AT THE CLIENT‟S SITE It m
Page 63 and 64: WORKING THROUGH RECRUITMENT AGENCIE
Page 65 and 66: Legal Considerations: Agencies are
Page 67 and 68: Building rapport is ESSENTIAL. If y
Page 69 and 70: Website In the 2010 National Freela
Page 71 and 72: Freelancers often complain about th
Page 73 and 74: A good way of doing that is to send
Page 75: The value of the final pension you
Page 79 and 80: EMPLOYERS‟ LIABILITY INSURANCE Al
Page 81 and 82: PROFESSIONAL INDEMNITY INSURANCE Pr
Page 83 and 84: PRE-DISPUTE TAX COVER HMRC Officers
Page 85 and 86: BUSINESS INTERRUPTION INSURANCE Bus
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