One of the most common barriers to going freelance is the loss of your employee benefits package but there are a number of alternative products which help to cover this. We have teamed up with the Independent Financial Advisers at ContractorFinancials to offer 123 clients access to contractor specialist advice on everything from mortgages to pensions, insurance to investments. With their help, you can make the move to freelance contracting whilst still enjoying the benefits package you’re used to.
This breakdown shows you how easy it is to replace lost employee benefits with a contractor specific solution that is tailored to your needs
Contractors can choose to personally fund a pension scheme or alternatively, your Ltd company can fund a scheme on your behalf which can help to significantly reduce your corporation tax bill. You can invest up to 100% of your earnings into a pension as long as you don’t exceed the annual allowance of £50,000.
The good news is that you get far more control over how your money is invested as you are no longer confined to your employer’s scheme. This gives you the freedom to choose a pension with low annual charges and a fund selection that suits your attitude to risk and plans for the future.
Find out more about Contractor pensions
An accident or illness that prevents you from working can have a serious impact on your finances when you are freelancing as your income relies on your ability to work. However, there are a number of insurance products aimed specifically at Contractors which will pay an agreed monthly income until you are well enough to return to work.
You can protect up to 75% of your income with an executive plan which is arranged through your company, or you could opt for one day cover which protects up to 66% of your income against even minor illnesses such as flu. The advisers at ContractorFinancials will help you find the sick pay arrangement to suit your needs.
Find out more about Contractor Income Protection
Find out more about Contractor Critical Illness Cover
Providing the peace of mind that your family is financially protected if the worst happens, death in service benefit is often one of the most sought after benefits for permanent employees. Thankfully, Contractors needn’t miss out on this essential cover as you can arrange life insurance which will pay out a lump sum on death. You can choose to cover yourself up to a certain age e.g. 65 or for the whole of your life so you know you are protected.
Unlike death in service benefit which is simply based on a multiple of your salary, the amount protected by life insurance can be as little or as much as you choose. This means you can arrange for your mortgage to be paid off completely or you could leave a substantial income for your loved ones so you know they will be financially secure if you are no longer around to pay the bills. If you are concerned that your family may struggle to manage a lump sum payout then you can opt for Family Income Benefit which pays a set monthly income to your dependants instead.
You can now pay for your life insurance through your ltd company and save tax on the premiums thanks to an innovative product called Relevant Life Cover. This allows you to take advantage of the same benefits and tax savings as a large employer arranging death in service benefit.
Find out more about Contractor Life Insurance
If you work for a large employer then you probably have access to Private Medical Insurance but going Freelance doesn’t have to mean long NHS waiting lists when you fall ill. You can arrange Private Medical Insurance through the advisers at ContractorFinancials which will offer you the same, if not better cover than your employee scheme. You can even protect your family with your policy and there are a number of discounts available depending on the cover you choose.
Find out more about Private Medical Insurance
If you currently enjoy the use of a company car then there is no reason why you couldn’t fund one through your ltd company. The good news is that you wouldn’t have to pay any VAT if you purchased a car through your business so this could save you a tidy sum compared with buying one personally. If you decide not to get a car then travel costs can still be offset as expenses and paid through the company to save tax so you could end up saving money on your travel costs to and from the client's office.
Some would-be Contractors worry about their chances of buying a new home or re-mortgaging an existing property without a regular salary and payslips each month, but this needn’t come between you and the freedom that contracting can bring.
The mortgage advisers at ContractorFinancials have negotiated specialist underwriting terms with a number of high street lenders which enables them to arrange your mortgage based on a multiple of your annualised contract rate rather than your annual salary. Calculating your mortgage using your contract rate allows Freelancers to borrow far more than you would be able to as a permanent employee.
For example, if you could secure a contract earning £400 per day then ContractorFinancials would simply multiply this by the number of weeks you work in a year (48 allowing for 4 weeks holiday) and this would give them the equivalent of your projected annual earnings. Most contractor friendly lenders will offer 4.25 times this annualised contract rate, so the mortgage figure that you could achieve with one of their specially negotiated Contractor mortgages would be £408,000. Some lenders can offer even more than 4.25 times this annualised contract rate, depending on your circumstances.
You don’t have to be a freelancing veteran to secure a contractor mortgage and you can even apply on the very first day of your first contract so there is no need to postpone your plans for home ownership any longer.
The experienced team at ContractorFinancials will handle the entire mortgage application process for you, from your initial enquiry to you getting the keys to your new home; the advisers are on hand to guide you through. This not only helps the process run smoothly and quickly but also frees up more of your time to concentrate on keeping your client happy and because they know that time is money for Contractors, they manage your application via phone, email and post so you avoid lengthy face to face meetings.
Find out more about Contractor Mortgages
To find out more about how you can bridge the gap between permanent work and the financial freedom that contracting can bring, call us on 0845 834 0269.
The value of investments may fall as well as rise and past performance is not a guide to future returns.
Your home may be repossessed if you do not keep up repayments on your mortgage
Financial advice is given by Contractor Financials, which is a trading name of Contractor Financials Ltd and is regulated and authorised by the Financial Conduct Authority.