Recently self employed at 40

Ant77

Hi all, I’ve recently gone self employed at 40 and I’m really confused as to how to continue saving for retirement, do I go for a personal pension, isas, or attempt to save enough to buy another property and go buy to let??

Anonymous101

Hi Ant,


To answer that question we would need to know much more detail around you financial situation, current investments / savings, annual income and expenditure, plans for retirement and how your employment is structured (Ltd company, sole trader etc). The question is impossible to answer without knowing a good part of that.

MallyGirl

BTL is unlikely to be the one unless you are in the building trade.
Pensions give tax breaks on the way in but the money is locked away till at least 55, ISAs are tax free on the way out and can be accessed at any time - maybe a mix of the 2 might be something to consider.
Self employed or director of a Ltd company- makes a difference.

Dox

Ant77 wrote: »

Hi all, I’ve recently gone self employed at 40 and I’m really confused as to how to continue saving for retirement, do I go for a personal pension, isas, or attempt to save enough to buy another property and go buy to let??

You don't sound as if you have any experience of the BTL market, let alone having the cash to buy another place, so doesn't sound as if that is the ideal way to go.

A personal pension, with the associated tax advantages, would certainly make sense, with perhaps some cash in an ISA as well as 'rainy day' money.

SonOf

or attempt to save enough to buy another property and go buy to let??

BTL was an area a monkey could have made money on in the 30 years prior to the credit crunch. The UK went through a credit boom due to deregulation of borrowing and it coincided with massive immigration which created a shortfall of property.

Post credit crunch, you have a change increased regulation of borrowing and the Government position of targetting landlords as it wants to reverse the decline in the number of homeowners. So, going forward, you need to be a little more skilled on being a landlord. Ideally, being able to buy rundown properties on the cheap and do them up or spot high rental yield opportunities in multiple occupancy style properties.

Are you actually self employed or a director of a limited company (the latter is not self employed even though its your own company)? It makes a big difference when it comes to pensions.

drumtochty

If you are a director of a limited company the tax treatment of a great number of limited companys will change for the worse at April 6th 2020.


As IR35 will come into play. It will increase the tax and national insurance take of many of these companies by around 20%.


At the moment a limited company director can contribute via the limited company to a pension before national insurance is applied to their income.


After IR 35, the pension payments are only available to be paid after both NI employee and employer contributions are deducted.

grnglide

IR35 has been around since year 2000!


The changes next year (not officially called IR35) are still about "disguised employment".


If you are supplying goods or services to more than one customer and there is no intermediate agency then you should be impacted.

xj650t

If as a limited company director you are within IR35, you can select to go Umbrella, many umbrella companies offer the option of Salary Sacrifice which will save you the NICs and Tax.

It’s not ideal but it’s at least an option.

drumtochty

grnglide wrote: »

IR35 has been around since year 2000!


The changes next year (not officially called IR35) are still about "disguised employment".


If you are supplying goods or services to more than one customer and there is no intermediate agency then you should be impacted.

Not the case if your client is a reasonable size company, whethere through an agency or not from April 2020.

drumtochty

xj650t wrote: »

If as a limited company director you are within IR35, you can select to go Umbrella, many umbrella companies offer the option of Salary Sacrifice which will save you the NICs and Tax.

It’s not ideal but it’s at least an option.

Therefore in that case you are not actively running a limited company for that part of your companies income. For someone new to self employment that appears to be a better idea than running a limited company if the persons limited company would be under the new "IR35".