Financial Planning for Self Employed People Ireland

Build financial security beyond your next invoice

Being self employed gives you greater control over how you work, but it also places more responsibility on you to protect your income, plan for retirement and manage periods when business is slower.

There may be no employer pension, sick pay, death in service benefit or company protection scheme in place.

At Dooley Insurance Group, we provide financial planning for sole traders, contractors, consultants, freelancers and other self employed professionals across Ireland.

We help you build a practical plan around your income, business commitments, personal finances and long term goals.

Arrange a Self Employed Financial Review

What is financial planning for a self employed person?

Financial planning for a self employed person involves managing both immediate financial needs and longer term objectives without relying on employer benefits.

A complete plan may consider:

• Personal income
• Business income
• Tax liabilities
• Emergency savings
• Pension contributions
• Retirement planning
• Income protection
• Life insurance
• Specified illness cover
• Business debts
• Personal debts
• Savings and investments
• Family responsibilities
• Business succession
• Your eventual exit from self employment

The objective is to create greater financial stability inside and outside the business.

Why self employed people need a financial plan

When you work for yourself, personal and business finances are often closely connected.

The same income may need to cover:

• Household expenses
• Mortgage repayments
• Tax
• Business rent
• Insurance
• Equipment
• Vehicle costs
• Professional fees
• Staff or subcontractors
• Pension contributions
• Savings
• Future business investment

If income falls, both the household and the business may be affected.

A financial plan can help you decide what needs to remain accessible, what should be protected and what can be committed to longer term goals.

Managing an irregular income

Self employed income can change from month to month.

This can make it difficult to maintain regular savings, pension contributions and personal spending.

A practical approach may involve separating income into specific financial priorities:

• Business operating costs
• Tax
• Personal drawings
• Emergency savings
• Pension contributions
• Insurance
• Business investment
• Longer term personal savings

The exact structure will depend on how the business operates and how predictable the income is.

The purpose is to avoid making major financial commitments based only on one particularly strong month or year.

Building an emergency fund

An emergency fund can provide a financial buffer if income falls, a client pays late or unexpected costs arise.

The amount required will depend on:

• Household expenditure
• Business overheads
• Income stability
• Number of clients
• Access to credit
• Existing savings
• Insurance
• Family circumstances
• How quickly income could be replaced

A self employed person may require both:

• Personal emergency savings
• Business cash reserves

These funds serve different purposes and should be considered separately.

Money required for emergencies should remain accessible and should not normally be exposed to significant investment risk.

Pension planning for self employed people

Self employed people are responsible for arranging and funding their own retirement plans.

Without an employer automatically making contributions, it can be easy to delay starting a pension.

A personal pension or PRSA may allow you to build retirement savings and claim income tax relief on qualifying personal contributions, subject to current Revenue rules and limits.

We help self employed clients understand:

• Personal pension options
• PRSA options
• Regular contributions
• Once off contributions
• Pension tax relief
• Investment fund selection
• Pension charges
• Retirement projections
• Existing pension transfers
• Retirement access options

A pension should be structured around your actual income and ability to contribute.

How much should a self employed person contribute to a pension?

There is no single contribution level that suits every self employed person.

The appropriate amount depends on:

• Age
• Income
• Existing pension value
• Years remaining until retirement
• Target retirement income
• Business cash flow
• Personal expenditure
• Existing savings
• Current Revenue limits
• Ability to maintain the contribution

Someone with variable income may choose a manageable regular contribution and review whether an additional payment is affordable later in the year.

The pension should support your future without placing unreasonable pressure on your business or household today.

PRSA advice for self employed people

A Personal Retirement Savings Account can provide a flexible pension option for someone who is self employed.

A PRSA allows you to:

• Make regular contributions
• Make additional once off contributions
• Increase or reduce contributions
• Stop and restart contributions, subject to provider terms
• Select from available investment funds
• Continue the arrangement if your employment status changes
• Access retirement options under applicable pension rules

The right PRSA will depend on your income, contribution plans, retirement age, investment preferences and the charges applied.

A PRSA should be reviewed regularly rather than left unchanged for many years.

Personal pensions for sole traders

A sole trader may be able to arrange a personal pension based on income from their trade or profession.

When considering a personal pension, we assess:

• Relevant earnings
• Contribution affordability
• Available tax relief
• Investment timeframe
• Fund selection
• Charges
• Retirement age
• Existing pensions
• Target retirement income

The suitability of a personal pension or PRSA will depend on your circumstances and the flexibility required.

Pension tax relief for self employed people

Qualifying personal pension contributions may receive income tax relief, subject to age related contribution limits and the maximum level of earnings recognised by Revenue.

Relief is generally based on relevant earnings from the trade or profession connected to the pension contribution.

Tax relief is not automatically granted in every circumstance. Contributions must be made to a qualifying arrangement and claimed correctly.

Your accountant or tax adviser can help confirm the relief available based on your income and tax return.

Income protection for self employed people

An illness or injury can create an immediate financial problem for someone who is self employed.

There may be no employer sick pay, and the business may stop generating income if you cannot work.

Income protection can provide a regular replacement income if you are unable to work due to an eligible illness, injury or disability and meet the terms of the policy.

When arranging income protection, we consider:

• Average earnings
• Business structure
• Occupation
• Financial evidence
• Required monthly benefit
• Deferred period
• Existing savings
• Policy cessation age
• Medical history
• Premium affordability

Income protection is designed to replace part of your personal earnings. It does not automatically cover all business overheads or lost company revenue.

Choosing an income protection deferred period

The deferred period is the length of time you must be unable to work before an income protection benefit can begin.

A self employed person with limited savings may require a shorter deferred period.

Someone with substantial personal savings or another household income may be able to select a longer period.

The decision should consider:

• Personal emergency fund
• Partner’s income
• Business cash reserves
• State benefits
• Household expenditure
• Outstanding debts
• How quickly the business could resume
• Premium cost

Shorter deferred periods will generally result in higher premiums.

Specified illness cover

Specified illness cover can provide a lump sum if you are diagnosed with an illness listed in the policy and meet the insurer’s medical definition.

The payment could be used to:

• Replace lost income
• Repay or reduce debt
• Cover household expenses
• Fund treatment or rehabilitation
• Pay for changes to the home
• Create an emergency financial reserve
• Allow a partner or family member to take time away from work

Specified illness cover is different from income protection.

Specified illness cover pays a lump sum for a listed diagnosis. Income protection pays a regular benefit following an eligible inability to work.

Life insurance for self employed people

A self employed person may not have death in service cover through an employer.

If your family depends on the income you generate, personal life insurance can provide financial support following your death.

The amount of cover required may depend on:

• Personal income
• Family expenditure
• Mortgage
• Personal debts
• Dependent children
• Education costs
• Existing savings
• Pension death benefits
• Existing life insurance
• Value of the business
• How quickly the business could be sold

The family should not have to rely entirely on the future sale of the business.

Mortgage protection

Self employed applicants can arrange mortgage protection, subject to medical and financial underwriting.

Mortgage protection is designed to repay the outstanding mortgage following the death of an insured borrower during the policy term and a valid claim.

Self employed people should also consider whether clearing the mortgage would provide sufficient protection for the family.

Additional life insurance may be required to replace income and meet other household expenses.

Savings and investment planning

Once tax, emergency reserves and short term commitments have been addressed, a self employed person may want to build savings or investments outside a pension.

Accessible personal investments can provide:

• Greater financial flexibility
• Funds before pension benefits become available
• Support during a career change
• Capital for a future purchase
• An additional source of retirement income
• Reduced dependence on the business

Before investing, we consider:

• Emergency savings
• Tax liabilities
• Business cash requirements
• Investment timeframe
• Access needs
• Attitude to risk
• Capacity for loss
• Existing pensions
• Personal financial goals

Money required for tax, emergencies or short term business expenses should not normally be invested in a long term market based product.

Separating personal and business finances

A clear separation between personal and business money can make financial planning easier.

Depending on the business structure, this may involve separate accounts or clearly defined allocations for:

• Business income
• Business expenses
• Tax
• Personal drawings
• Personal savings
• Pension contributions
• Insurance
• Business reserves

A sole trader and a limited company have different legal and tax structures.

Financial planning should reflect how the business is actually operated.

Protecting business overheads

Personal income protection is designed to replace part of your earnings. It does not normally cover every ongoing business expense.

If you cannot work, the business may still need to pay:

• Rent
• Utilities
• Insurance
• Equipment finance
• Vehicle costs
• Professional subscriptions
• Staff costs
• Loan repayments
• Accounting fees

Depending on the business, separate business overhead protection or another contingency plan may need to be considered.

Reducing reliance on one customer

A self employed business can become financially vulnerable where a large proportion of income comes from one customer or contract.

If that work ends unexpectedly, both business and household income may fall.

A financial review should consider:

• Customer concentration
• Contract terms
• Notice periods
• Emergency savings
• Business reserves
• Personal expenditure
• Ability to replace the income
• Insurance limitations

Insurance generally does not cover the normal commercial risk of losing a customer. Cash reserves and income diversification may therefore be particularly important.

Planning for tax

Self employed people are responsible for managing their own tax payments.

Money expected to be paid to Revenue should be kept separate from personal spending and long term investment.

Your financial plan should consider:

• Income Tax
• Preliminary Tax
• VAT where applicable
• USC
• PRSI
• Capital Gains Tax where relevant
• Pension contribution deadlines
• Business expenses
• Accountant fees

Tax calculations and filing should be handled with an accountant or tax adviser.

Financial planning can then be based on the income genuinely available after tax and business costs.

Planning to stop working

A self employed person may not have a standard retirement date.

You may want to:

• Stop working completely
• Reduce working hours
• Retain a small number of clients
• Sell the business
• Transfer it to family
• Employ someone to manage it
• Move into consultancy
• Continue working by choice

Your retirement plan should reflect what you actually expect to happen.

If the business cannot be sold or transferred, your pension, savings and investments may need to provide a larger proportion of your retirement income.

Can the business fund retirement?

A business may have value, but that does not mean it can automatically provide retirement income.

The value will depend on:

• Profitability
• Recurring revenue
• Customer concentration
• Dependence on the owner
• Assets
• Liabilities
• Market demand
• Strength of management
• Transferable contracts
• Buyer interest

A business that depends completely on the owner may be difficult to sell.

Building pensions and investments outside the business can reduce reliance on achieving one future sale price.

Financial planning for contractors and consultants

Contractors and consultants may earn strong incomes but experience uncertainty between contracts.

Their financial plan should consider:

• Contract duration
• Notice periods
• Income gaps
• Pension contributions
• Income protection
• Professional expenses
• Tax liabilities
• Emergency reserves
• Personal investments
• Retirement planning

A high current income does not automatically create long term financial security.

Part of that income needs to be converted into assets that remain available when the contracts or work eventually stop.

Financial planning for tradespeople

Tradespeople may face additional financial risks because income often depends on physical ability to work.

An injury or health condition could prevent someone from performing their occupation even where they remain capable of lighter work.

Financial planning for a self employed tradesperson may include:

• Income protection
• Specified illness cover
• Life insurance
• Pension planning
• Emergency savings
• Business overhead planning
• Equipment finance
• Retirement planning
• Succession or sale of the business

The definition of incapacity within an income protection policy is especially important for a physical occupation.

Financial planning for medical and professional workers

Self employed doctors, dentists, pharmacists, physiotherapists, solicitors, accountants and other professionals may depend on specialist qualifications and the ability to perform specific duties.

A financial plan should consider:

• Personal income
• Practice income
• Professional overheads
• Income protection
• Pension contributions
• Business protection
• Partnership agreements
• Personal investments
• Retirement or practice sale
• Family financial protection

Personal and practice risks should be assessed separately.

Our self employed financial planning process

Understanding your income

We review how the business generates income, how stable it is and how much is available after business expenses and tax.

Reviewing your personal finances

We assess household expenditure, debts, savings, pensions, investments and family responsibilities.

Identifying financial risks

We identify what could happen if income falls, illness prevents you from working or the business cannot be sold.

Building a practical plan

We explain the pension, protection and investment options that may support your goals.

Working with your accountant

Where appropriate, we coordinate with your accountant or tax adviser on pension contributions, income and business structure.

Reviewing your progress

The plan should be reviewed as income, business performance and personal circumstances change.

Why choose Dooley Insurance Group?

Dooley Insurance Group has supported self employed professionals, Irish businesses and families since 1957.

Our financial services team provides advice across pensions, PRSAs, income protection, life insurance, specified illness cover, investments and retirement planning.

We consider your personal finances and business income together before discussing the options available through our agency appointments.

Our financial services team includes Conor Swan, QFA, RPA and SIA, Director, and David Renwick, Senior Financial Consultant.

With offices in Naas, County Kildare and Edenderry, County Offaly, we provide financial planning for self employed people locally and throughout Ireland.

Self employed financial planning questions

What financial protection does a self employed person need?

Depending on the circumstances, this may include income protection, life insurance, specified illness cover, mortgage protection and business protection.

Can self employed people have a pension?

Yes. A self employed person may be able to arrange a personal pension or PRSA and claim income tax relief on qualifying contributions.

How much should I contribute to a pension?

The appropriate amount depends on age, income, existing pension value, retirement age, cash flow and target retirement income.

Can pension contributions reduce my tax?

Qualifying personal pension contributions may receive income tax relief, subject to Revenue rules, age related limits and relevant earnings.

What happens if I cannot work?

Income protection may provide a replacement income if you cannot work due to an eligible illness or injury and meet the policy conditions.

Can I get income protection if my income changes?

It may be possible, but the benefit is based on earnings and financial evidence. Fluctuating income should be discussed during the application.

How much emergency savings should I keep?

The appropriate amount depends on household expenditure, business overheads, income stability and how quickly income could be replaced.

Should I invest or contribute to a pension?

Pensions and personal investments serve different purposes. A pension may provide tax relief but has access restrictions, while personal investments may provide greater access but different tax treatment.

Should I rely on selling my business for retirement?

A sale may form part of your plan, but its timing and value are not guaranteed. Building pension and personal assets can reduce this risk.

Do I need life insurance if I have no employees?

You may still need personal life insurance if a spouse, partner, child or other person depends on your income.

Is specified illness cover the same as income protection?

No. Specified illness cover pays a lump sum following a qualifying diagnosis. Income protection pays a regular benefit following an eligible inability to work.

Can I make once off pension contributions?

Depending on the pension arrangement, you may be able to make additional contributions, subject to provider terms and current Revenue limits.

Should my accountant be involved?

Yes. Your accountant should advise on business accounts, tax, contribution deadlines and the income available for pension planning.

How often should I review my financial plan?

The plan should generally be reviewed annually and whenever income, business structure, family circumstances or financial goals change.

Arrange a self employed financial review

Working for yourself should give you greater control over your future, not leave your retirement and financial security exposed.

A structured financial plan can help you protect your income, manage uncertainty, build retirement assets and reduce reliance on the future value of your business.

Contact Dooley Insurance Group to arrange a self employed financial review.

The information on this page is general and does not constitute personal financial, legal or tax advice. Pension rules, tax treatment and product availability may change. Recommendations can only be provided following an assessment of your circumstances and the products available through our agency appointments.

Dooley Insurances Ltd t/a Dooley Insurance & Mortgage Brokers and Dooley Insurance Group is regulated by the Central Bank of Ireland.