Self-employed female? You’re not alone

The number of women in self-employment is on the rise, making up around a third of the five million people in the UK who work for themselves.

While being your own boss has undeniable benefits, this way of working comes with particular challenges, too – challenges that, as a female, you don’t need to face on your own.

Overview:

  • Approximately 1.7 million women in the UK are self-employed,1 and the number of freelance working mothers has increased by 79% since 2008.2
  • More often than not, women find themselves juggling clients and workload as well as further challenges – for example, battling the gender income and pension gaps, childcare costs and other unpaid responsibilities.
  • Your financial adviser can support you with different areas of personal finance, including pensions, inheritance, investments and income protection. Don’t feel like you’re alone – start the conversation today and get your finances in order.

Entrepreneurial spirit

More and more women are self-employed nowadays, whether that’s running a business, freelancing or contracting out. According to the Office for National Statistics, around 1.7 million women are classed as self-employed in the UK, meaning that they now constitute approximately a third of the five million people who work for themselves.3

In a world where the self-employed sector has historically been dominated by males, the pace of this change is unprecedented. Working for yourself offers the potential for many more females to bypass some of the limitations generally associated with working for an employer.

Let’s take the gender pay gap, for example, which subsequently causes a gender pensions gap in retirement, not to mention the issues to do with maintaining a work–family balance.

Being your own boss can give you a real sense of freedom. You have the opportunity to set your own rates and hours, make the most of your skills and specialise in a vocation that suits you – offering you the ability to build a personal brand based on your experience and focusing on clients who you have chosen to work with.

Yet being a self-employed woman can also present challenges. For instance, the gender pay gap widens among this demographic, with self-employed men earning 43% more on average than their female counterparts.4

This is compared to an average gender pay gap of 15.5% for all employees.5 It may indicate an ‘entitlement gap’, where freelance females set lower rates for their work than men – this could be dealt with by women working on self-advocacy and negotiation skills.

In the meantime, research from IPSE, the organisation for independent workers, discovered that self-employed women feel the impact of late payment from suppliers to a greater extent.6 Indeed, lengthy delays in paying people is inexcusable, but part of this could be linked to the recent deluge of women entering self-employment for the first time.

Read on to learn more about succeeding in the three main areas of personal finance that the self-employed battle with.

  • Income

Being your own boss can often mean having a changeable workflow, plus it’s far trickier to budget or plan ahead when revenue changes month by month. Being self-employed also involves spending so much time dealing with clients and overheads that your own finances are last in the priority pecking order. This is particularly problematic for women, who may have gone freelance having less savings than their male counterparts.

It would be advisable to have a plan for regular spending needs, such as your mortgage and living costs, and set up a direct debit to ‘pay yourself’ each month based on an average of what you earn.

Next, concentrate on longer-term needs – for example, planning for retirement, building up investments, the potential for a period of maternity leave or childcare costs, if you decide to have children.

Calculate what to put aside for these life events – perhaps your pension gets a twice-yearly boost after a specific client pays you, or you can save something for 10 months of the year. True, it can be a balancing act to tick all the boxes, but it’s crucial to have a plan in place nevertheless.

  • Advice

Most entrepreneurs employ an accountant to deal with their own tax return and that of their company. While an accountant can work wonders with Income and Corporation Tax, a financial adviser is often more geared up to help with savings goals, pensions, inheritance issues, investments and insurance ‘protection’ that pays out if you become critically ill or die.

Women often feel they have to do everything themselves. However, outsourcing financial planning – just as you would with any other business need – can mean you have one less thing to organise and show you that you’re not in this alone.

  • Tax

Think beyond the amount that you take as income – it’s just as important to consider the most tax-efficient way of doing it. On the whole, paying into a pension from your company will be the best way of maximising your income while minimising your exposure to tax, as you’ll be taxed on earnings after pension deductions.

The drawback is that you can’t access money in a pension until the age of 55 (57 from 2028). The advantage, however, will be that you’ll have control over how much income you withdraw, and therefore how much income tax you will be subject to.

If you’re a self-employed woman who would like help with tax planning and building a financial plan for yourself and your business, please don’t hesitate to get in touch with your Wellesley financial adviser today. After all, you’re not in this alone.

Sources:

1 Coronavirus and self-employment in the UK, Office for National Statistics, April 2020
2 The opportunities and challenges of being a self-employed mother, IPSE, August 2020
3 Coronavirus and self-employment in the UK, Office for National Statistics, April 2020
4 Men earn 43 per cent more than women in self-employment, IPSE research reveals, IPSE, March 2020
5 Gender pay gap in the UK: 2020, Office for National Statistics, November 2020
6 The cost of COVID: How the pandemic is affecting the self-employed, IPSE, 2020

The value of an investment with St. James’s Place will be directly linked to the performance of the funds selected and may fall as well as rise. You may get back less than the amount invested.

The levels and bases of taxation, and reliefs from taxation, can change at any time and are generally dependent on individual circumstances.

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