I have been self-employed for nine years. And I’m part of a growing club: the number of self-employed Britons is now at its highest ever level with 4.93 million of us working for ourselves.
There are many reasons why being self-employed is brilliant. You can usually fit your working day around your commitments: for me that means childcare. My son yesterday was too ill to go to school (oddly, he was well enough to lie on the sofa playing with the iPad but frankly, I couldn’t face the battle of wills and he’s back there today). If I’d been an employee then as a single parent I would have had to hope my employer was understanding and let me take a day off.
But then, how many employers would – or should – be expected to allow employees to leave work early/work from home/take school holidays off just because they have childcare or other needs? Being self-employed means never having to feel guilty about taking time off. Other advantages to being self-employed include not having to commute; spending less on clothes because you don’t need to be smart and not having to deal with office politics. And of course you get to decide what work you want to do rather than being told by your boss.
But there are downsides too. Not having a reliable income is a pain. No sick leave or holiday pay is annoying as is not qualifying for unemployment benefits if you can’t work. You’ll also have to do your own tax as you won’t be on PAYE unlike employees. And importantly, you won’t have a pension. Employees are these days automatically enrolled into work-based pension schemes and they get contributions from their employer too. If you’re self-employed, you’re on your own. You’re going to have to set up your own pension and your contributions will be the only ones going in. If you’re struggling or just gone self-employed you might not be able to afford a pension. But if you can, then do try: even if it is only a small amount then it is worth it. That’s because you get tax relief on your contributions: put in £80 and if you’re a basic or non-taxpayer then it’s boosted straight away to £100.
Frankly, it’s about the only gift you’ll get from the government if you are self-employed so it’s worth taking. I’m only putting a tiny bit into my pension each month – work is hard to come by at the moment so there are other calls on my income – but at least it’s something. I’ve got a Sipp – find out more about pensions from our guides.