The Basics For The Self-Employed

Being self-employed can often mean the line between business and personal finance gets blurred. It’s hard to create a divide and have a firm barrier between them both. Our expert team have come together to deliver you our most useful tips for managing your finances.

Create a Budget

When you’re self-employed it means you’ve not got a guaranteed income that you can rely on being around the same amount each month. This can make budgeting trickier. Creating a budget for expenses allows you to have a clear idea of where your money is going and where you could save some too. You’ll see if you’re being realistic with your outgoings and if you can afford to be taking on any extra outgoings.

For example, if you’re a builder, you’ll be able to see if you’ve got enough spare to have your van branded with your logo or whether you need to save a little longer for it.

Make Sure You’re Clued Up on Expenses

You’ve maybe completed your self-assessment already – to make sure that you receive as many deductions as possible on your upcoming tax bill you should be thinking about it all year round. As we always say, keep detailed records of allowable expenses so you don’t miss anything.

Educate Yourself on Tax & National Insurance

When you begin self-employment you need to inform HMRC and pay tax and national insurance on your earnings. Make sure you’re recording all of the information on your earnings and staying on top of it all.

For accurate tax calculations, you will need records of both incomings and outgoings. Keep these records as you go rather than doing them all at once. Lots of apps now can help you with this and mean you can do it digitally. When using an accountant, they will need your records too, much easier when they can be accessed digitally!

Talk to your accountant about how much tax you should be putting aside and move it to a different account so you know you’ve got your tax bills covered.

Get Your Bills Prioritised

When you’re self-employed, some months can be a little tighter than others. We suggest listing all of your bills and splitting them into 2 lists – priority and non-priority debts.


  • Mortgage
  • Income tax
  • Council tax
  • Energy bills

Don’t forget that your energy bills can vary depending on how often you’re at home.

Pay Yourself

We’ve spoken about this before on our blog, and we honestly cannot emphasise enough how important this is. Paying yourself a salary means that you know what you can spend and won’t be tempted into spending extra from your business account. Don’t forget, you’ll need to set aside some money for tax too. If you have a month where you earn more than normal, put the excess away in a separate account so that it’s almost an ‘emergency fund’ or saved for a rainy day. This will help you out on months where income is a little lower than normal. Aim to have at least 6 months worth of expenses in your emergency fund to cover yourself.

Plan for Later Life

When you’re self-employed there’s no company pension scheme and nobody to tell you about your options for retirement. Starting a pension fund and sticking to the payments can be a hard habit to develop and maintain as somebody who is self-employed. The earlier you can start the better. You’ve got more time to contribute to your fund before you retire and more time to benefit from tax relief.

Holidays, Illness and Injury

It’s a good idea to work out you’re average net income over 3 years. Divide the figure by 12 and use this number to create a monthly budget. If you work out that this figure doesn’t allow you to pay all of your monthly bills then you’ll need to find a way of cutting back on your spending or increasing your income.

Unfortunately, most of us are ill or injured at some point during our working life. When you’re self-employed there’s no sick pay. Look into income protection insurance – you’ll probably need it if you’re self-employed with no sick pay to rely on.


If you need any more information on managing your finances as somebody who is self-employed, don’t hesitate to get in touch with our friendly team today!

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