As a sole trader, the financial future can feel a little uncertain at times. However, there are still many ways you can make the horizon look a little clearer and safer. Take a look at FSB’s advice below.
Taking advantage of tax relief and grants
While you do have certain obligations when it comes to paying tax as a sole trader, there are still many ways you can reduce the amount of money you have to spend as tax.
For example, there are a lot of expenses you can claim back on such as mileage if you need to drive at all as part of your business. Similarly, if you work from home, you can offset a portion of your utility bills as business expenses, or claim a flat rate depending on the amount of hours you work each week.
You could also try to save money and reduce business expenses in other ways. For example, if you have your own business premises, the Carbon Trust Green Business Fund may be able to provide some funding to make your business more energy efficient; you save a great deal of money initially, and your increased energy efficiency reduces your bills, meaning more money that you can use to save with.
Workplace pensions for one
Sole traders do not have any auto enrolment obligations, but if you’re trying to save money, it makes sense to do so through a workplace pension all the same. On top of your own contributions to the pension fund, workplace pensions also offer government tax relief, which means you end up with more money than you put in.
Being signed up to a workplace pension also offers you an additional benefit. That is, as soon as your business grows and you take on an additional member of staff, you do need to meet auto enrolment obligations by enrolling both yourself and each member of staff. Being prepared for that eventuality will save you time and effort in future, as well as simply helping you prepare for your own financial future.
As a potential alternative to a workplace pension, the UK Government has recently brought in a new scheme called a Lifetime ISA, which can be a brilliant savings solution for anyone whether they’re a general member of the public or a business owner. You can use the savings either for your first house, or simply keep them safe and ever-increasing until retirement.
The main benefit to a Lifetime ISA is that the government will increase your savings by a massive 25% each year. That is, if you transfer the annual maximum of £4,000 into your Lifetime ISA, you will then be left with £5,000 once the Government add the bonus, all before interest as well!
Lifetime ISAs can be opened between the ages of 18 and 40, and the annual bonus is paid until you turn 50, so the younger you are and the earlier you open one, the more you’ll save for your future completely free. So while it is a more beneficial resource for younger sole traders, anyone can benefit thanks to the 25% bonus.
Following this advice should leave you far more prepared for the future than you might have been before, but, equally, you’ll feel far more at ease about what the future might bring knowing you have a financial safety net in place.