Hi all, It's my first yr end as a freelancer and I'm curious on how others save for tax bills and pensions...
I use a business account that puts 25% of my income into a tax pot. Great, but this were i'd love some advise...
I was hoping to take some left over balance (from the tax pot) and contribute to my pension. But where do I draw the line in the tax pot? From this point on I'll have a tax bill every six months. I feel I should keep that pot completely separate and make monthly pension payments from the my main business account instead.
Really interested to hear how other freelancers handle it. I'm not limited, just self employed.
Thanks all.
Replies7
- Hi James, I recommend reading "Profit First". The book is a bit American centric but it's still a good way to manage your business money.
- Great question @James Murphy, I've just sent you a DM!
- I work through a limited company and I put money asside into a separate account for tax - both Corportation Tax and VAT, whilst you can't sensibly and legally aviod VAT there are all sorts of things you can do to manage Corporation Tax. But work with your advisors on that.Pensions are very complex see a specialist advisor - but also interogate them carefully. I spoke to one that suggested consolidating various pensions into one to make a bit more and when I asked about the expectatins of the consolidated benefits I would only see a few thousand more than the current performance but there would be enough in the new fund to also the cover the advisors new fees and the ongoing fees.And with the drop in tech stocks over the last year I doubt if the fund would have grown in the last 12 months so in theory at least I would currently be out of pocket for the advisors fees.
- @Brenda Rosete same here!I have a business account with starling banking and add my % in to a separate saving space to always keep taxes tucked away
- @Brenda Rosete Love this! Great way of working and Old School is usually also steady school. Nothing wrong with that. Better to have it than panic
- @Brenda Rosete Thanks Brenda. I think that's where I've gone wrong. Treating the tax pot as a 'Tax & Pension' pot. I think they should be kept separate. Otherwise it gets complicated.
- Hi James, I am very old school and don't know about any apps that can help you organise these things, I am sure there must be good ones. I just go every month and save 30% of my income, 20% goes to my tax bill savings so at the end of the year I've some money intended for it and the other 10% goes to my Nest pension (I was employed before becoming freelancer so I just kept the same pension scheme I had) Hope it helps, and good luck on your freelance adventure!
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