Making your money work harder: investing as a self-employed professional

Without employer pension contributions or automatic enrolment, self-employed professionals often face greater responsibility for securing their financial future. We explore why investing matters and the practical steps that can help you build long-term financial resilience.

Being self-employed brings many benefits. You have greater control over your work, flexibility over your income and the opportunity to build a successful business. However, one area that is often overlooked is long-term investing and retirement planning.

Unlike employees, who are often automatically enrolled into workplace pension schemes and may benefit from employer pension contributions, self-employed professionals are responsible for managing their own financial future. While running a business will understandably take priority, setting money aside for the future remains just as important.

Research has consistently shown that self-employed workers are less likely to save for retirement than employees.

According to research from interactive investor, 38% of self-employed people have no pension savings at all, rising to 50% among those aged under 35. The same research found that six in ten self-employed individuals have less than £10,000 in pension wealth. These figures highlight the challenge many self-employed professionals face when it comes to long-term financial planning.

There are a number of reasons for this. Managing irregular income, reinvesting profits back into the business and meeting day-to-day expenses can make long-term saving feel less urgent. Unlike employees, the self-employed do not usually benefit from automatic enrolment into a workplace pension or employer pension contributions.

Instead, many focus on building a successful business but give less attention to creating personal wealth outside of it.

Your business is often your biggest asset as it may provide an income today and potentially be sold in the future.

However, relying solely on the future value of your business can create unnecessary risk. Not every business will be easy to sell, and its value may be affected by economic conditions, market demand or other unforeseen factors.

Building personal investments alongside your business can help diversify your assets and reduce reliance on a single source of future wealth.

Investing does not necessarily require large lump sums. Regular contributions over time can help you build a portfolio aligned with your long-term objectives.

Depending on your circumstances, investment options may include:

• Personal pensions
• Stocks and Shares ISAs
• General investment accounts
• Investment bonds
• Other tax-efficient investment arrangements

The most suitable approach will depend on your objectives, investment timeframe, attitude to risk and overall financial situation.

Pensions remain one of the most tax-efficient ways to save for retirement.

Tax relief on pension contributions can help reduce the effective cost of saving, making pensions an important consideration for many self-employed professionals.

HMRC data shows that self-employed individuals contributed approximately £3 billion into personal pensions during the 2024/25 tax year, demonstrating that many business owners continue to view pensions as an important part of their long-term financial planning.

While pensions may not be the right solution for every objective, they can form a valuable part of a broader financial plan.

One of the biggest challenges for self-employed people is that income can fluctuate throughout the year.

Rather than viewing investing as an all-or-nothing exercise, it can be helpful to create a plan that reflects the realities of self-employment. Some individuals choose to invest regularly each month, while others review their finances periodically and make contributions when business performance allows.

The key is ensuring that investing remains part of your overall financial strategy rather than something that is continually postponed.

Investing is not only about retirement planning.

Depending on your goals, investing may help support:

• Building long-term financial security
• Creating future income streams
• Funding children's or grandchildren's education costs
• Purchasing property in the future
• Passing wealth to future generations
• Achieving greater financial independence

Having clear objectives can help shape an investment strategy that supports both your personal and financial aspirations.

Effective financial planning extends beyond investments alone.

Self-employed professionals should also consider:

• Retirement planning
• Tax planning
• Protection against illness or loss of income
• Estate planning
• Succession planning
• Making the most of business and personal assets

As your business evolves, your personal financial arrangements should evolve alongside it.

This article is for general information only and does not constitute financial, investment, pension or tax advice.

The value of investments can fall as well as rise, and you may get back less than you invest. Past performance is not a reliable indicator of future returns. Tax treatment depends on individual circumstances and may change in the future. The suitability of any investment or pension arrangement will depend on your individual circumstances and objectives.

As with all investments, your capital is at risk.