When people decide to make the big switch from being an employee to being self-employed, they are probably focusing on the benefits of being your own boss. Perhaps they are thinking of gaining flexibility with their work schedule, or reaping the rewards of their hard work. They might be passionate about a business idea and decide that their only option is to pursuit their dream. That’s is the most attractive side of becoming self-employed, but there are less glamorous things that need to be considered.
On top of thinking about business plan, costs, sales, and a million different things, you also need to think about the implications on your personal finances. The not-so-exciting areas of tax, insurance and KiwiSaver need to be covered.
Tom Hartman in his article Get sorted: Switching to self-employed? mentions 3 key things to get you started:
- You are now free to tax yourself – it can be tricky to figure out how much tax you will have to pay, and this can be unnerving. He suggests paying yourself first, separating business expenses from your personal budget. And having a good accountant, it makes all the difference!
- Getting self-employed cover right – you need to have a good insurance plan, since becoming self-employed means you are giving up your sick-leave. There’s also ACC to consider. Since insurance solutions when you are self-employed are quite bespoke, it is best to get expert advice.
- Don't forget KiwiSaver – although you will be missing out on your employer contributions, it doesn’t mean KiwiSaver is not for you. You can still get your $521 from the Member Tax Credit every year if you contribute enough, plus you are still putting some money away for your retirement.
If you are thinking of switching or you’ve recently became self-employed, gives us a call. We can help you make sure you have the right level of insurance cover, while making you sure you are not paying for things you don’t need. We can also discuss with you how you might structure your ACC and make the most of their cover options for self-employed. You can email us on email@example.com or give us a call on 0800 500 510.