Did you know that the average salary for a contractor is £50,820 and that self-employed people make up 12.4% of the UK workforce?

More and more Britons are going solo and is it any wonder why? You can enjoy tax efficiency, flexibility and career growth.

However, you need to know how to save money. Freelancing does not involve a fixed income and therefore finances can be erratic. One month you could be earning the big bucks and the next your income could be non-existent.

Therefore it is imperative to save money for a rainy day. No matter how successful you are as a contractor, you will find yourself in dry spells of work. Curing certain periods of the year, like Christmas, businesses do not tend to employ new clients as projects are quiet.

How can you ensure you have funds available? Don’t splash the cash when you do have it. Here are 6 tips to help you save money.

• Limited Company

Changing the kind of business structure that you have, could save you thousands of pounds.  According to a recent article, freelancers using an umbrella company could be up to £10,000 better off with a limited company. UC Finance estimates that 100,000 umbrella contractors working in the UK would pay less tax if they switched their set-up.

• Equipment

You will need certain tools and equipment to carry your work out effectively. One way you can save money is to purchase in bulk and from traders, to get a discount. Shop around for the best prices. There are various sites that specialise in trade equipment like www.equipmenttraderonline.com, www.pcworld.co.uk, and www.graco.com.

• Rates and allowances

There are certain expenses which you can claim back from the client to help you save money. These allowances are tax-deductible and you are entitled to submit a reclaim such as mileage rates, food/accommodation allowance, and pension premiums. Here is an example of a template expense claim form.

• Taxes

The majority of self-employed people pay their tax bill for the year in January so when money is tight, it pays to put some money aside every month. Try putting away 10% of your monthly income to ensure you have enough funds saved for your tax payments.

• Overheads

What expenditures do you have to fork out every month; office rent and utilities, monthly phone bill? Analyse your overheads and ask yourself if you really need them. Could you work from the client’s site or from home, instead of renting a costly office space?

Download a budget planner from the likes of Which?, Open Office or Money Saving Expert.

• Accounting help

It could cost you more in the long-run by not employing contractor accountancy services. As your business grows, so will your tax affairs and it is imperative to pay your taxes on-time or you will incur a penalty by HM Revenue & Customs (HMRC). You could save money by hiring an expert to manage your books on your behalf.

Conclusion…

It pays to be practical and put money away for a rainy day. Follow the top tips above to save some of your hard-earned finances for when work is quiet.

This article was provided by Nixon Williams, specialists in expert contractor accountancy services in the UK.