Managing money and bills self-employed can feel like a juggling act. Especially since you don't have steady pay or the automatic deductions for things like taxes and national insurance.
However, with the right systems in place, you can stay on top of your finances and ensure everything is paid on time. Here are some tips we’ve loved that can help take the hassle out of bills and finances. (Feel free to print this and use it as a checklist!)
- Set Up a Separate Business Bank Account
We recommend separating your business finances from your personal ones. This makes it easier to track income and expenses. Make sure you track all your income to know how much tax to pay at the end of the year.
- Use Accounting Software or Spreadsheets
This can help track income, expenses, and VAT (if you’re VAT-registered). Many of these tools also let you automate invoicing and reminders. If you're more comfortable with spreadsheets, create a system to log income and expenses.
Unlike a regular job, income tax and National Insurance contributions (NICs) are not automatically deducted from your earnings. You could open a separate tax savings account for a percentage of your earnings. Ensuring you have the money available when it’s time to pay your taxes.
You can claim business-related expenses to reduce your taxable income. So keep all your receipts and invoices in case you need to prove them to HMRC. Accounting software can help categorise and track expenses automatically. Or you can log them in a spreadsheet.
- Invoice Promptly & Keep Track of Payments
You can use templates or invoicing software to create clear, professional invoices. Include your business details, a breakdown of the work, payment terms, and bank details. Don’t be afraid to chase overdue payments with gentle reminders. Or more formal follow-ups. Keeping cash flow healthy is crucial!
Saving around 3-6 months living expenses can help cover unexpected costs. Or if you have short periods when income is lower than usual. Consider using a high-interest savings account to help your money grow. Income protection, critical illness cover, and private health insurance can provide an extra safety net.
- Consider Pension & Retirement Planning
If you don’t have access to a workplace pension, you’ll need to set up a private pension. The Self-Invested Personal Pension (SIPP) is a good option for many self-employed individuals. Allowing you to contribute directly to your pension fund. Chat to your accountant about tax relief on your pension contributions. A great incentive to save for the future.
If you're ever unsure about anything tax-related, it's always worth speaking to an accountant or financial advisor. Is there a specific area you’re finding tricky to manage? Like invoicing or taxes, or are you just starting to build these habits?
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