How can a freelance musician secure their financial future?

31 January 2022

Question by M

How can a freelance musician secure their financial future?


Answered by Boring Money

Hi M

Like all freelance or self-employed people it is your responsibility to arrange to pay your own tax and National Insurance but on top of that there are other things to consider both short and longer term.

What will you do if you are unable to work through illness? - do you need to build up some emergency funds or pay for some income protection insurance to ensure you have a way to pay your bills if your income stops?

Do you have a pot of money for emergencies? Car repairs, vet bills and other unexpected expenses will pop up and without savings you may end up putting them on a credit card and paying interest unnecessarily.

What are your plans for your older years? Will you still perform / teach in any capacity - how much income will you still have? Will you have royalties for music written?

How will you top this up to ensure you have enough? -

Starting a pension is a good step for most people, as you benefit from tax relief on your contributions - effectively free money - so for every £100 you put in, £25 gets added by HMRC. You can't draw on this money until at least age 55 so you may need other things as part of your plan too if you want to retire earlier than this.

Your state pension is paid from age 67/68 depending on how old you are now - you need to have 35 years' NI contributions to get a full pension, but anyone with at least 10 years' contributions will get a pro-rata payment. You can check your entitlement on the gov.uk website and see if you may need to pay extra to catch up on years that you have missed, or if you will have enough by the time you reach retirement.

For most people a combination of these things is best, and the sooner you get started the longer your money has to grow.

Hope this helps

Claire

Answered by

Boring Money