Be your own boss - retired and self employed

Paul Lewis / 07 February 2019

Could you do with some extra income to supplement your pension? Have you got a marketable skill? Then you could join the growing ranks of the over-65s who are self-employed and thoroughly enjoying being their own boss



There are nearly five million self-employed people in the UK and the number aged over 65 has trebled to around half a million since 2001. Of the 1.2 million people working past the age of 65, four out of ten are self-employed – a bigger proportion than any other age group.

1.2 million people work past the age of 65 and four out of ten are self-employed

Self-employment has great advantages. It means you can work from home and avoid the expense and hassle of commuting. Your hours are flexible and entirely up to you, so you can fit in with family visits or health appointments. And you are your own boss. There will never be someone a lot younger than you telling you what to do!


Come up with a plan

The first step is to think what you could do. Is there a way to use the skills of your working life to earn money on your own account? A teacher could give private tuition. Can you turn skills learned at work into a consultancy? Do you have a hobby that could be turned into a job? An animal lover could walk dogs. Someone who tracks down family history could become a genealogist. And bookkeepers are always needed. All of us have skills and they can be marketed – perhaps at first to friends and neighbours, then branching out to a wider public.

Being self-employed requires some discipline. The most important thing – as with any service job – is to be reliable. Keep to deadlines and supply goods or services on time. You will also have to keep proper accounts of your expenditure and income, and always issue proper invoices for work done.

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Keep accurate records

It is very important that you keep accurate records of everything you spend on the business. So if you buy computer equipment, stationery, goods for resale, you should always keep receipts. The same goes for bus or train tickets. Nothing is too trivial to claim if it is an expense incurred in the course of business – they all add up.

Keep receipts and you'll be able to justify the expenses you're claiming

For your phone and broadband, you should work out what proportion of the expense is business and claim back that share of the cost. If you use your own car to travel as part of your work, then calculate what share of the petrol and expenses is business and claim that back in your accounts. If you use a room in your house mainly as an office, then you can claim a share of the cost of heating and lighting. The important thing is to keep accurate records with receipts and to be able to justify to HM Revenue & Customs the expenses you are claiming.

Spare room start up tips

If your turnover goes above the limit to pay VAT – currently £85,000 a year – then you must register for VAT and add it to your fees or prices. However, if you buy and sell second-hand goods, there are complex VAT rules and many exemptions. From later this year, once your turnover exceeds £85,000 you will have to file online using HMRC-approved software as part of a process known as Making Tax Digital (MTD). At that point many people will want to pay an accountant to help them.

Register with HMRC

Once you become self-employed, you must tell HMRC and register as self-employed by 5 October in the second tax year that you are working for yourself. So if you start working as self-employed this month, you must register by 5 October 2019. But if you start after 5 April, then you can wait until 5 October 2020.

If your turnover is less than £1,000 in a tax year, you don't have to register

You do not have to register if your turnover – not profit, but the total amount you take in fees and charges – is less than £1,000 in a tax year. This trading allowance covers any sort of activity whether it is consultancy, baby-sitting, writing, making goods for sale, or buying and selling at car boot sales and on the internet.

Once you register, you will have to fill in a self-assessment tax return every year. But if your turnover is low you can do a simplified statement – the self-employment ‘short’ pages on your tax return – which just needs totals rather than itemised details. Keep all your financial records somewhere safe and do not throw them away. A business can normally throw away records from 2012/13 or earlier on 1 February 2019 but in some cases they may have to be kept longer.

Many people like to have a separate business bank account, although it is not strictly necessary. You can use your own personal account, but it should not be a joint account. It is sensible to set aside 20% of your income in a savings account to pay your tax bill, which becomes due in January and July.

Stop paying NICs

One advantage of working past state pension age – either as an employee or being self-employed – is that you no longer have to pay national insurance contributions (NICs). Before that age, Class 2 contributions of £2.95 a week have to be paid if your self-employed profits in the year are more than £6,205 a year. (Below that income you do not have to pay them, but you can do so to boost your NICs record to get a bigger state pension.)

Class 4 contributions are 9% of your profits between £8,424 and £46,350 and 2% on profits above that. Class 4 contributions continue for the whole tax year in which you reach state pension age. That means they will not be due in 2019/20 for anyone born before 6 January 1954, who will reach state pension age in March 2019. But they will be due in that year for any self-employed people born on that date or later.

Most self-employed people earn relatively little. But for older people, self-employment income can be a useful top-up to their pensions.

Go to gov.uk for more information on self employment.

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The opinions expressed are those of the author and are not held by Saga unless specifically stated.

The material is for general information only and does not constitute investment, tax, legal, medical or other form of advice. You should not rely on this information to make (or refrain from making) any decisions. Always obtain independent, professional advice for your own particular situation.