We are here to help you with 7 top budgeting tips to help you get better at budgeting as a self-employed person. It can be daunting to suddenly manage personal and business finances, so try some of these and let us know how you get on!

1. Be strict about keeping business and personal finances separate

As a sole trader, you don’t legally need a business bank account or even a separate one, but it is SO much easier if you do. Making things easier for yourself from the start is the best way, so get a bank account for the business and make sure all the transactions there are just for your business and your personal account and cards are just for personal use. It will make doing your accounts a lot simpler.

There are plenty of excellent business banking accounts you can set up online now; Starling, Tide, Mettle and Monzo are free, and all get good reviews, especially Starling. Traditional high street banks usually offer the first 12-18 months free, but you may need to pay a fee. NatWest, Barclays, HSBC, etc., all have business banking accounts. As a sole trader, you can use a personal banking account to avoid fees, although the bank may frown upon this if they realise it is what you are doing.

Please note that if you are a Limited company, you MUST keep finances separate as the money is the business’s, not yours; therefore, a business bank account is required. Please see our blogs about the pros and cons of a limited company and sole trader.

2. Be Clear on Your Monthly Outgoings

Signing up for many things when you start can be tempting, so try to be sensible. If you can use the free CRM system or software option, do. As time progresses, you may expand and need to use the premium or upgraded versions of things, but keep track of the costs. Also, track office rental, fuel costs, stock, staffing, etc. Everything your business pays out over the month.

If you have a year or more under your belt, you can work out the average monthly cost of some of the less regular expenditure by adding a year’s worth together and dividing by 12.

3. Look at Business Expenses Regularly

Be brutal here; reassess your outgoings every quarter and determine what is needed. Are you paying for Adobe? How often do you use it? Are you paying for things for a team member who isn’t there? Can you get a better deal if you negotiate a renewal? You might be surprised, and it doesn’t hurt to ask. It can apply to anything you pay out; ask yourself if it can be obtained for less or if you need it. Technology changes, and new things come onto the market constantly, so keep updated or ask someone who knows.

4. Use a Budget Template

There are numerous budgeting templates at your disposal, or if you prefer, you can create your own spreadsheet using Excel. Our website offers a comprehensive template specifically designed for business income and expenditure, which can be easily customised to suit your business needs. Feel free to access it by clicking on the following link: https://www.businessaccountingbasics.co.uk/personal-budget-template/

Try to allocate monthly time to update it, perhaps when you do your bookkeeping work. This will help you monitor and track your income and outgoings accurately and see any patterns or areas you can cut down on.

5. Try to Create Regular Annual Income Sources you can Rely on

As part of running your business, you will try to get new sales; whether it is a service or product, you need customers. This is obvious, but the more regular and reliable this workflow is, the easier it is to budget. It is hard to give generic advice when your business could be anything; however, wherever your customer comes from, ensure you track this (data is powerful).

Create an email list of prospects, perhaps by giving away something (a lead magnet) and utilising multiple marketing streams. So, do not just use one social media platform or one advertising type; use a few if one starts to go wrong or you lose a social media account. Subscription models work well to create regular annual income; if that fits in with your business, think about how you could make it work.

6. Be Aware of Quieter Times of the Year

The more up-to-date your figures are, the easier it is to track when the quieter times of year are for your business. Christmas could be a booming time if you are in product sales, or it might be dead if you provide a summer-friendly service. It will vary, but every business will have times of the year when it is busier than others, and learning this is easy once you use a good accounting system, as you can view your figures on a graph or chart and track revenue.

Understanding this can help you offset these times by running special offers or even thinking of extra products and services to provide at that time. Or perhaps you want to plan some time off to coincide!

7. Budget Self-Employed Income Tax and NI

When budgeting for tax and national insurance, it’s crucial not to overlook this aspect, as it can quickly become a nightmare if you do! Remember, you need to set aside money for personal income tax and National Insurance, and the amount will vary depending on your profits.

Consider using a reliable online tax estimator, such as our self-assessment tax calculator, to make this process easier. By utilising such tools and planning your budget accordingly, you can transform the potentially stressful and chaotic experience of paying your tax bill into a smooth and hassle-free process. After all, receiving a substantial tax bill without having the necessary funds set aside can be overwhelming and daunting. So, preparing and ensuring you’re financially equipped will save you from unnecessary stress and worry.

Make sure you complete your self-assessment tax return on time and accurately. Look at hiring an accountant or bookkeeper if unsure of the process. They can help guide you through the complexities of filing your self-assessment tax return, ensuring you meet deadlines and have all the correct information ready for HMRC. Whether it’s keeping track of receipts or understanding tax codes, a professional accountant or bookkeeper will ensure your accounts comply with regulations and are accurate. Don’t let filing your self-assessment tax return be a headache: seek professional advice to ensure you get it right!

Accounting Software

Finally, a good accounting software package can assist in all your accounting needs, from raising invoices to tracking payments and preparing your financial statements. It helps ensure you have all the information needed for accurate reporting and saves time by streamlining repetitive tasks.

With a comprehensive accounting software solution, businesses can easily track their finances in real time, analyse trends over time, and make informed decisions about the future of their business. As a bonus, having a reliable and secure accounting package means you can be confident that the data you rely on is up-to-date and accurate.

We hope you find these tips helpful and can apply them to your business. Just remember to keep up to date with your accounts and bookkeeping and track everything, big and small, then budgeting will soon become second nature.

Further Reading for Self-Employed

If you are thinking of changing to a cloud-based accounting system, check out our article on the best accounting software for self-employed.

We hope you have enjoyed our article on how to budget. If you are self-employed, please read our related articles.

Claiming Business Expenses

Bookkeeping for self-employed

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Do you need to know how to budget your money in these changing times?

With the Coronavirus outbreak, many of us will have a significant change in both income and expenditure. For some, the biggest worry is can you afford to live during these changes?

We have developed a budget template, which will help you keep track of your finances. Many things will change, and below we have listed some of these changes to help get you started. You may just be thinking about the drop in income due to reduced wages, but most peoples expenses will also change during this time.

Budget Template

Below is a simple budget template, but we also have a full budget template that you can compare your budget to your actual income over the year. The full spreadsheet also includes a worked example, instructions and free download.

Download the free template using the link at the end of this page.

Save the spreadsheet to your hard disk.

Go to the budget tab and start changing the Income 1, Income 2 etc. to you actual income. Examples of your income might be wages, benefits and carers allowance. See the example below.

Do the same for the expenses. Examples are rent, mortgage, council tax, food, petrol, utilities and clothes.

The best place to start is by looking at your most recent bank statements. If any of these figures will stay the same, enter them into the spreadsheet. Examples of figures which may not change are direct debits and standing orders. Other figures may vary, and at the moment, you may not know what they are. This template will help you to look at different situations and change the figures as needed.

Budgeting Changes to Income

Due to the Coronavirus, there may be changes to your income. Below are some useful resources to see what your income might be.

If you have lost your job, look at the Turn to Us website to see what you are entitled to claim in benefits. They have a benefits calculator which is a great tool.

The Government website has lots of information on employment and financial support. It includes statutory sick pay (SSP), Universal Credit and Employment and Support Allowance.

If your employer has kept you on, but you are not working, the Government has set up a scheme where they pay 80% of your salary. Your employer may make up the difference, but if they don’t, your wages will reduce. Remember that the tax and NI will change as well.

For self-employed it may be difficult to know what your income is, put in your best guess.

With help calculating wages and self-employed income use Employed and Self-employed Tax calculator.

Once you have entered all the income is is time to start looking at expenses.

How to Budget your Money – Changes to Expenses

There are a few ways in which you can reduce your expenses and below are some ideas which might help.

Mortgage Holiday and Interest

If you pay mortgage one of the most significant ways, you can reduce it is by taking a mortgage holiday. Speak to your mortgage company directly. Remember that it will add on to the end of the mortgage period. If you are on a variable rate mortgage due to interest rates reducing, the mortgage company should pass it on. They will notify you of any changes.

Food

Although your monthly food bill may stay the same, it is worth looking at any take-aways or eating out. A good way of saving money is to cook food from ingredients where possible. Enter your figure for what you think you may spend per month.

Petrol

While staying at home, your petrol spend should reduce. It might be through not doing the school run, going to shops less, visiting friends or outings. Estimate what you think the cost will be. For some, it may even be zero.

Shopping

It can be a difficult one as spending will change. With most shops shut your spending may go down, but online is still available. If you have the kids at home, you may need to purchase items to keep them entertained. Be realistic about the monthly spend.

Utilities

Now might be an excellent time to see if you can get a better deal on your utility bill. There are lots of choices; using a comparison site is the best way. They offer deals which you can’t get directly.

Other Expenses

If you are looking at how to budget your money look at all other expenses, look at each one and decide if it will stay the same, increase or reduce. Be realistic at what your costs are.

A good place for further help is the Money Saving Expert.

Once all the figures are entered check to see if your income is higher than the expenditure. If the spending is higher, look to see if there are any ways to reduce your spending further.

You may need to review how to budget your money several times as things change or perhaps more help is put in by the Government.

By downloading our simple budget template you agree to our terms.

Simple Budget Template

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Disclaimer

The information contained in this website is for general information purposes only. The information is provided by Angela Boxwell, and while I endeavour to keep the information up-to-date and correct, I make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability or availability with respect to the website or the information, products, services, or related graphics contained on the website for any purpose. Any reliance you place on such information is therefore strictly at your own risk.

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