More and more people - particularly in Wales – are self-employed, but according to recent figures* only eight percent of self-employed workers aged 25 to 34 are saving into a private pension.

This is compared with 59 percent of employees in the same age group who are contributing to their pension pot.

While many enjoy the freedom, the flexing of those entrepreneurial muscles, and the particular sense of achievement that working for yourself brings, there are some knotty financial planning issues we see time and again from those who work for themselves. One of the most common is the failure to save enough for retirement.

Of course, if you work for yourself you are entitled to the same State Pension as every other worker. Since April 2016 there has been a new flat rate pension based entirely on a worker’s National Insurance record. But many of us will want another source of income once we retire, so it is important to make extra provision.

As a self-employed person this takes discipline. After all, you don’t have an employer to match your pension contributions and your income might irregular, so setting money aside each month might be harder.

But there is support out there. For instance, you will be entitled to tax relief on your pension contributions, usually up to a maximum of £40,000 a year, provided your taxable earnings in the tax year are at least this.

So, if you’re a basic-rate taxpayer, for every £100 you pay into your pension the government will add £25. If you are a higher rate taxpayer you can claim back a further £25 for every £100 you pay in through your tax return.

This annual allowance for 2016-2017 is £40,000. If you go over £40,000, you won’t get tax relief on further pension savings, but you may be able to carry forward any unused annual allowance from the past three years.

Most self-employed people use a personal pension for their pension savings. There are various type of personal pensions so it is important to assess which one is the neatest fit with your circumstances – I would strongly advise that you seek professional financial advice before you commit.

For professional financial advice, tailored to suit you, call the Morgan Hemp team on: 01792 466428.

*From the RSA Entrepreneurial Audit 2017.

Morgan Hemp is continuing with its steady expansion, having boosted the team with another new recruit.

We are pleased to have  taken on a new Trainee Accountant, Zoe Foister, who is studying towards her ACCA professional accountancy qualifications.  

Zoe, aged 22 brings with her a 1st Class Honours degree in Mathematics from Swansea University, and she has joined the Morgan Hemp team as an integral part of the continued growth of the Swansea-based company – highlighted by the firm’s expansion into neighbouring premises in recent years.

Our Managing Director, Richard Morgan, says this and other recent appointments are part of the firm’s wider, ongoing success story.

“Morgan Hemp has a diverse client base from sectors including legal, medical, construction and property as well as local business start-ups and entrepreneurs. We have continued to expand and mature as a company and we are proud to be able to offer an ever-growing number of specialist services to our clients.

“But we are also aware of the importance of nurturing new talent and I’m delighted to see Zoe bring her enthusiasm to the Morgan Hemp team. I look forward to seeing her grow in the company.

“Zoe displays the kind of diligence with a professional and approachable manner, that we at Morgan Hemp pride ourselves upon, and she is already proving herself to be a respected member of staff.”

HMRC have recently announced changes to the way the intermediaries legislation (known as the 'IR35 rules') will be applied to off-payroll working in the public sector. In particular, contractors who provide their services to a public authority through an intermediary will need to be aware for the changes, which take effect from 6 April 2017.

Broadly, from 6 April 2017, responsibility for deciding whether the legislation should be applied will move from the worker's intermediary to the public authority the worker is supplying their services to.

Where the rules apply, the fee-payer (the public authority, agency, or other third party paying the intermediary) will be responsible for calculating income tax and primary National Insurance contributions (NICs) and pay them to HMRC. These amounts will be deducted from the intermediary's fee for the work provided. The worker's intermediary will be able to offset an amount equivalent to the income tax and NICs deducted from payments to it from the fee-payer against its own income tax and NICs liability in the tax year.

The changes will apply to:

- public authorities who hire off-payroll contractors;
- public sector tax managers, payroll managers, human resources managers and procurement managers;
- agencies and third parties who supply contractors to the public sector; and
- contractors who provide their services to a public authority through an intermediary.

Before the changes take effect, public authorities, agencies and third parties supplying contractors will need to consider existing contracts and make the appropriate preparations. Whilst it is for the public authority to determine whether off-payroll working rules apply when engaging a worker through a personal service company, anyone who believes they may be affected should seek further advice.