As a contractor, it’s likely that you have left a job where you were provided with a range of benefits from your employer – such as a company pension scheme, Death in Service cover or income protection. These offer valuable protection for you and your family and it is essential that you review your requirements in each of these areas to ascertain if you need to replace the lost benefits now that you are working for yourself.
We have been working with FW Accounting for several years to deliver tailor-made financial solutions for clients and, as a result, we are very aware of the areas of advice that should be priorities for you.
Making the change from employee to contractor, typically being paid by a day rate, can mean that your earning potential increases dramatically. However, your income relies completely on your ongoing ability to work. This means that there would be serious implications if you were absent due to an illness or injury, as you may find yourself unable to meet your ongoing expenditure, including mortgage costs, car finance, utility bills – even your weekly food bills and general living expenses.
Even if you have protection in place – be it life assurance, critical illness cover or income protection – when were they last reviewed? The cost of life cover has come down in recent years, and income protection benefit is, by its very nature, based on your income and this can fluctuate. You could find yourself with too little cover or, conversely, you may be paying a premium for benefits that you would be unable to claim.
There are various ways of providing protection, whether through your business or personally, and significant savings that can be made by reviewing your cover. For example, even as a one person limited company, it is possible to have life assurance which is similar to the Death in Service arrangements provided by larger employers, with the benefits based on a multiple of your earnings and premiums paid by the company.
Another type of protection is Private Medical Insurance. This can be extremely useful to a business owner as it provides the opportunity to plan when and where you receive medical treatment. Indeed, there are now plans available that can provide you with a cash sum, so you can even elect to receive treatment overseas if that is a more convenient or cost effective option.
As financial advisers, Kudos specialise in how to maximise your personal and business planning, seeking to take full advantage of tax breaks and incentives available within the overall framework and tax structure suggested by FW Accounting, with whom we work closely in these areas.
If you wish to discuss your own situation in more detail, please contact your FW Accounting Account Manager, or call Kudos directly on 01224 652100.