In an exclusive interview with Express.co.uk OpenMoney co-founder Anthony Morrow gave advice to self-employed workers on the best way to ensure security in later life. He said: “The downside [of self-employment] is that there is no auto enrolment.
“For the self-employed there are tax benefits of doing so.
“Pension contributions are deductible when you come to the end of the year.
“When you write a check to the tax man, there are options there to reduce how much you pay the tax man by making these pension contributions.
“So, a lot of self-employed people can make their tax contributions at the end of the year when they work out how much profit they have made, how much tax they will be paid, and they can then make a view about making a pension.”
With over four million self-employed workers in the UK, conversations about later life should be prioritised.
Mr Morrow continued: “It’s really important for self-employed people to have that conversation early as to what life will be like after I have stopped work or want to slow things down.
“A pension should always be a key part of that conversation.”
Whilst not guaranteed, the longer someone invests, the more chance they have to get a positive return with stocks and shares.
The chancellor has suggested that in future, tax breaks for the self-employed – such as lower national insurance – may end.
These were in place because the self-employed do not get sick pay or holiday pay. They were also meant to encourage entrepreneurship.
However potential national insurance hikes on the self-employed will concern many given how independent workers have been impacted by the pandemic.
Many have gone without Government help, but applications for the fifth Self-employment Income Support Scheme (SEISS 5) remain open – with the deadline on September 30.
To be eligible, you have to have submitted your 2019 to 2020 tax return on or before 2 March 2021, have profits of less than £50,000 and your profits must be at least equal to your non-trading income.
Mark Collins, Head of Tax at Handelsbanken Wealth Management, said: “Ultimately the government will need to raise taxes at some point.
“The government cannot rely on a prosperous recovery bringing in sufficient revenues alone.
“I suspect certain areas will be targeted such as increasing capital gains tax rates, and possibly equalising the rates of national insurance contributions paid by self-employed persons with that of employed taxpayers.”