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So you’ve taken the plunge. Or perhaps you haven’t quit your job yet but you’re thinking about it. You’ve got a great idea for a start-up, you’re about to become a contractor, or maybe you’re set to open that vegan bakery you’ve dreamed about. Here’s our guide to becoming self-employed.

Firstly, good luck to you. Self-employed people are behind some of the most useful innovations of the past few centuries, think of Steve Jobs and Steve Wozniak in a garage in California, or James Dyson and his bagless vacuum cleaner. The self-employed are growing in number, too. They now account for more than 15% of the British workforce.

We at Nutmeg are proud to support freelancers and entrepreneurs. After all, we were established as a start-up business in 2011. We now employ nearly 180 people.

But there’s no doubt that the path of self-employment can be difficult. Here are some of the things you need to know.

You’ll need some savings to go self-employed

Being a salaried employee may have its downsides, but at least you know how much will be in your payslip each month. Unless you can rely on long-term contract work, as a self-employed person it is unlikely you’ll be able to predict your income with certainty. For those months when you make less than you’d like, you’ll probably need some funds to fall back on.

No sick pay or paid holiday

This is another reason for having savings. If you fall ill and miss work for a week, as a self-employed person that probably means a loss of earnings. Ditto for holidays. Although there’s nothing to stop a freelancer going on vacation as often as they want, you have to balance this freedom against income lost while enjoying time off. Of course, it’s possible to have holidays while self-employed, it just takes a bit of planning.

It may be harder to get a mortgage

This is tied to the uncertainty of your situation. If you’re paid a salary every month, that gives confidence to a mortgage lender that you can afford to keep up repayments over many years. Self-employed people must usually work harder to prove they are a trustworthy borrower. That probably means supporting your mortgage application with more paperwork than if you were in full-time work.

But don’t worry. Research commissioned by us found that self-employed people were no less likely to be homeowners than people in full-time work. It is possible to pursue your self-employed dreams and own a home. If you’d like help finding a mortgage, our friends at Habito can help.

Self-employed folk need to tackle tax and accounts

On the topic of paperwork, it’s likely that you’ll have a lot of it to deal with. As well as basic accounts and invoicing, at the minimum you’ll probably need to fill out a tax return each year, and you may have to submit additional forms such as a VAT return. Firstly, don’t panic. Many people find that the government’s self assessment tax return isn’t as complicated as it seems at first glance. But, if your situation does turn out to be complex, accountants are available to help you, ranging from low-cost online services to bricks-and-mortar practices.

You won’t get much help with your retirement

OK, this is where we get preachy, but bear with us because this is important. According to our research, the average self-employed person invests £77.46 a month into a pension scheme – less than half the average contribution of £169.85 a month. We also found that half of all self-employed people do not have a pension fund and that 32% of self-employed people are worried about their financial future.

We get it. You’re putting all your time and effort into developing a business, finding clients and doing the work you find rewarding. Setting up a pension doesn’t seem like a priority.

But think of it this way. Why should you make do with less than half what your salaried neighbour has in their pension pot, simply because you chose to take a risk and become self-employed?

How Nutmeg can help

Pensions are an efficient way to invest for everyone, not only salaried staff. As a self-employed person, you can benefit from tax relief in the same way as a full-time worker. For every £100 you contribute to a pension, the government provides a top-up of £25, or more if you are a higher-rate taxpayer. Nutmeg personal pensions add this top-up automatically – this is called “relief at source”.

Nutmeg pensions offer flexibility. You don’t have to contribute the same amount each month and you can invest a lump sum if you prefer. Our advice team are always on hand to help you decide how much you should invest in your pension.

If you already have pensions from previous employers, we can help you by consolidating them into a pot that gives you control over how your funds are invested and at what fee.

Many of our customers are self-employed. They include freelancers, entrepreneurs and even successful sportspeople. They use Nutmeg to invest their money easily, transparently and at a low cost.

Let us help you with your retirement planning, so you have the time and energy to spend on what matters – the work you care about.


  1. Trends in self-employment in the UK, 7 February, 2018, Office for National Statistics.
  2. As of 4 October 2019, Nutmeg employed 177 people.
  3. Nearly two-thirds of self-employed people (65%) were homeowners. Exactly the same proportion as the survey base as a whole. The survey was conducted by Populus on an online sample of 2,076 GB/UK adults between 2-4 July 2019. Data is weighted to be representative of the population of Great Britain. Targets for quotas and weights are taken from the National Readership Survey, a random probability F2F survey conducted annually with 34,000 adults. Populus is a founder member of the British Polling Council and abides by it rules. For further information see:
  4. These figures are from the Populus survey as above.

Risk warning

As with all investing, your capital is at risk. The value of your portfolio with Nutmeg can go down as well as up and you may get back less than you invest. A pension may not be right for everyone and tax rules may change in the future. If you are unsure if a pension is right for you, please seek financial advice.