8th March 2018
When you are a contractor, managing your finances is important, and finding ways to cut costs or avoid losing money helps to maximise your income. With that in mind, take the opportunity to check that you are getting the best value out of any insurance policies, loans and mortgages you have with these three ways to save money as a contractor.
If you are paying for your life insurance yourself, out of your own post-tax income, but you own a limited company, you can save yourself some money by choosing to switch from standard life insurance to Relevant Life Insurance. Both types of insurance offer the same benefits, so your level of cover won’t be affected by switching, and the cash lump sum is still paid directly to your family, tax-free, should you die.
The difference is that a Relevant Life Insurance plan is taken out by your company not you personally, and the premiums are paid before taxes are applied. This means that you benefit from tax relief as the premiums are a legitimate business expense, and there are no benefit-in-kind charges. By diverting your life insurance premiums to your business, you can effectively save 20% or more on the premiums.
It might seem strange to suggest taking out a policy that will cost you money every month as a way to save money, but it will benefit you if you fall ill or become injured. When you’re a contractor, if you’re not working, you’re not being paid. Even if you have suitable income protection in place for situations where you can’t work for a short period, this doesn’t pay out the full amount that you usually earn. Over time, this can cause financial difficulties or mean eating into your savings.
Getting well or recovered as soon as possible so that you can get back to work and start earning again is important. Not only are you losing money while you’re off, but if you can’t complete jobs, clients might look elsewhere- affecting potential future business. It’s hard enough these days to get a simple appointment with a GP, not to mention lengthy waiting times for simple procedures and cost-cutting on specialist treatment availability.
You can jump the queues and get the treatment you need fast through your private medical insurance policy. This gives you access to a range of services that will help you to get back on your feet quickly. The premiums will pay for themselves many times over should you fall ill or get injured at work, by ensuring you are working and earning again as soon as possible.
It’s easy to sit on your current mortgage and never change it, but if you do that, you might not be getting the best deal available to you as a contractor. Mortgage rates fluctuate all the time so it’s worth seeing if you can replace your existing mortgage with a better one.
Contractor-friendly lenders will view your daily rate, assess the value of your property and look at your earnings to determine what kind of mortgage offer they can give you. By finding the best deal, you could save money every month on your mortgage repayments (and cash to do more exciting things at the same time). You could also free up some of the equity in your home, or use the remortgage to consolidate other debts. Whichever option you prefer, each could save you money over your existing mortgage deal.
To understand how, through your mortgages or insurance, you can save money as a contractor request a free financial review with one of our specialist contractor advisors
All content is accurate at the time of publication