Saving money by working for self

[Mudball]

When you set up a company and work for yourself. You take on a lot of risks. It is easy for people to have a one dimensional view that 'you are a tax-wheeze' but people forget the downsides - no paid hols, no pension, sickness means no pay etc etc.
Been discussing this with a friend who has gone down the company route a few years ago. He has built a small corpus and looking for ideas to invest + maintain cash flow. Currently he gets pay + dividends. Pays appropriate NI.

My view (not advice) was
1) Continue pay + dividend
2) Pay into a SIPP (very long term, but wont be able to access till he is 60)
3) Keep 6 month worth of family/biz expenses as cash (or money market funds within an ISA)
4) Anything that is left could go into an stock ISA (fairly liquid) rather than property (difficult to shift if money is needed). Given his profession (and his DIY skills) he is unlikely to be able to manage a property portfolio

Would anyone do anything differently.

PS: None of this will be considered investment advice - but looking for broad general view of how Self employed look at money.

 

[GreiginFife]

When you set up a company and work for yourself. You take on a lot of risks. It is easy for people to have a one dimensional view that 'you are a tax-wheeze' but people forget the downsides - no paid hols, no pension, sickness means no pay etc etc.
Been discussing this with a friend who has gone down the company route a few years ago. He has built a small corpus and looking for ideas to invest + maintain cash flow. Currently he gets pay + dividends. Pays appropriate NI.

My view (not advice) was
1) Continue pay + dividend
2) Pay into a SIPP (very long term, but wont be able to access till he is 60)
3) Keep 6 month worth of family/biz expenses as cash (or money market funds within an ISA)
4) Anything that is left could go into an stock ISA (fairly liquid) rather than property (difficult to shift if money is needed). Given his profession (and his DIY skills) he is unlikely to be able to manage a property portfolio

Would anyone do anything differently.

PS: None of this will be considered investment advice - but looking for broad general view of how Self employed look at money.

As a career contractor I have always been mindful to have at least 6-8 months of money available in the business account in the event that work became unavailable (or I became unavailable for work). Removing money in to a long term, inaccessible, fund or investment would be a no-no for me unless it was still leaving me the required 6-8 months "buffer".

 

[Mudball]

As a career contractor I have always been mindful to have at least 6-8 months of money available in the business account in the event that work became unavailable (or I became unavailable for work). Removing money in to a long term, inaccessible, fund or investment would be a no-no for me unless it was still leaving me the required 6-8 months "buffer".

I agree.. hence my first thing was getting the min 6 mths buffer . Given he has a young family and a partner who does not work anymore (childcare is too expensive), you could argue this could be 8-12 months. Maybe i should reorder t
1) Continue pay + dividend
2) Keep 6 month worth of family/biz expenses as cash (or money market funds within an ISA)
3) A bulk could go into an stock ISA (fairly liquid) rather than property (difficult to shift if money is needed). Given his profession (and his DIY skills) he is unlikely to be able to manage a property portfolio
4) Anything that is left Pay into a SIPP (very long term, but wont be able to access till he is 60)

 

[PJ87]

I agree.. hence my first thing was getting the min 6 mths buffer . Given he has a young family and a partner who does not work anymore (childcare is too expensive), you could argue this could be 8-12 months. Maybe i should reorder t
1) Continue pay + dividend
2) Keep 6 month worth of family/biz expenses as cash (or money market funds within an ISA)
3) A bulk could go into an stock ISA (fairly liquid) rather than property (difficult to shift if money is needed). Given his profession (and his DIY skills) he is unlikely to be able to manage a property portfolio
4) Anything that is left Pay into a SIPP (very long term, but wont be able to access till he is 60)

Are the kids in school? Otherwise would it not be cost effective to have the wife 'work for him" drawing a small wage.. enough to claim the 30 free hours childcare for 3-4 year olds

 

[Mudball]

Are the kids in school? Otherwise would it not be cost effective to have the wife 'work for him" drawing a small wage.. enough to claim the 30 free hours childcare for 3-4 year olds

the first one will be in school this year (i think). second one is tiny. I thinks she has been set up as an employee, not sure of the financial or childcare arrangement. Will have to ask

 

[PJ87]

the first one will be in school this year (i think). second one is tiny. I thinks she has been set up as an employee, not sure of the financial or childcare arrangement. Will have to ask

Been lots of discussion of this at work, so many vacancies atm that overtime is through the roof, the big players from last year could push through the ceiling where u lose free childcare and one said he will have to stop covering as it will cost him £14000 in free childcare.. apparently a big working group being set up to deal with the issue as so many vacancies accross network in our grade that people will just stop doing the overtime due to childcare

 

[Mudball]

Been lots of discussion of this at work, so many vacancies atm that overtime is through the roof, the big players from last year could push through the ceiling where u lose free childcare and one said he will have to stop covering as it will cost him £14000 in free childcare.. apparently a big working group being set up to deal with the issue as so many vacancies accross network in our grade that people will just stop doing the overtime due to childcare

I agree Childcare costs is a joke in this country. Keeps a lot of workforce out of the employment cycle. We went thru it a few years ago and without the grandparents doing some babysitting, it would not have been possible for my wife to return to work. BoJo is looking into reducing childcare cost by lowering safety standards. Will be interesting.

 

[Bunkermagnet]

Dont those doing the childcare deserve a reasonable income?
If you're a Limited company, your company can pay into your private pension which the Gov add to, and it's also offset against your Corporation Tax bill by a percentage Win Win

 

[PJ87]

Dont those doing the childcare deserve a reasonable income?
If you're a Limited company, your company can pay into your private pension which the Gov add to, and it's also offset against your Corporation Tax bill by a percentage Win Win

They do indeed, the set free childcare places I'm not sure how much they make but it's not amazing amounts

A few were talking about upping Avcs to keep their childcare

I'm not too worried I'm a mid ranger of OT as misses asked me to not do extra nights, 384 hours to go according to the sheet My mate produced for us all to track

Also I do more Avcs than most as I always worry about pensions so want extra incase

 

[PhilTheFragger]

Look at an income protection/ critical illness policy in case you are unable to work.
All well and good having 6-8 months cash , but that will be gone in 6-8 months ?

 

[PJ87]

Look at an income protection/ critical illness policy in case you are unable to work.
All well and good having 6-8 months cash , but that will be gone in 6-8 months ?

That's great advise not just to self employed

With PAYE being ripped apart over years lots of people get poor sickpay now

 

[Mudball]

Look at an income protection/ critical illness policy in case you are unable to work.
All well and good having 6-8 months cash , but that will be gone in 6-8 months ?

I agree.. I think we have been reduced to 3 months now (on PAYE) but we can buy more via insurance