It may help to stave off boredom being a jack-of-all-trades, but the free-spirited lifestyle can make a mess of personal finances. Juggling multiple jobs tends to leave tax affairs in disarray, while the unstable cashflow can make saving extremely difficult. Nonetheless, Marianne Hippman, 22, has no plans to commit herself to a single career path.

She is currently a part-time office worker, interior design student and aspiring nutritionist. She is also about to start work as a freelance pole dancer. “It’s my personality,” she says, “I don’t want to be under anyone else’s control. If I did one thing for the next 50 years I would be so bored.”

However, this does not mean that Marianne will neglect her taxes and she wants to get them right at the outset. In her current job at a recruitment firm, where she works three days a week, she is a PAYE employee, which means that her employer deducts her income tax for her.

In her freelance job as a pole dancer, however, she will be responsible for her own tax affairs. “I do not want to get in a situation where I have not been paying tax through ignorance and then find that I am hit with a huge fine later on down the line,” she says.

Marianne will more than double her weekly earnings when she begins her freelance dance work. Her current monthly posttax salary is about £800, while her freelance work is set to bring in at least £200 a week. Marianne also receives about £800 a month from her parents.

The tuition fees on Marianne’s part-time interior design course are also covered by her parents, but she is determined to repay them when she can. “I appreciate that I am extremely lucky that my parents help me financially,” she says. “It would be nice to think that I can now start paying them back instead of taking from them all the time.”

Marianne’s expenses include £975 in monthly rent and bills. Her total monthly outgoings amount to £1,400, including TV licence, phone bills, pet insurance and motoring expenses. The car is half-owned by her parents and they pay the insurance, with the intention that she will begin paying this when she can afford it. She expects to use the car to travel to work when she starts freelancing.

Marianne banks with HSBC. Her online savings account pays 5.75 per cent, provided that she does not make withdrawals within the month. Her instant-access savings account pays 2.5 per cent.

Her MasterCard credit card charges an APR of 17.9 per cent on purchases and she has an outstanding balance of £600, which she intends to make a high priority. She has no savings but has been able to pay off £600 from her credit card this year. She has also used £1,000 of her £1,500 overdraft facilty. She is eager to begin a savings plan and aims to clear her credit card debts and overdraft.

Marianne has no health insurance but would like to know if she can afford to purchase some cover. Her employer does offer a pension scheme, but she has not joined and would like to know her options for retirement savings.

Marianne Hippman: what the experts say

TAX

Simon Dolan, managing director, SJD Accountancy

“The two most popular options for freelancers are to operate as a sole trader or to create a limited company.

“Operating as a sole trader would involve registering with the Revenue and Customs. Marianne can do this online at www.hmrc.gov.uk and must do so within three months of starting her freelance dancing.

“She then needs to declare her dancing income and expenses on her self-assessment tax return, which she will have to complete every year, along with the income from her employment at the recruitment agency.

“Marianne will be able to offset some of her expenses – travel, a proportion of the car costs, telephone, specialist outfits and training costs – against her self-employed income. The tax return is not too difficult to complete and can be done either online or by using the traditional paper version.

“The alternative for Marianne’s freelance work is to operate as a limited company, although there is more administration involved and it will cost more.

“I would recommend that Marianne operates as a sole trader while her income levels remain below the higher-rate tax threshold.”

TAX 2

Paul Howard, associate director, Chiltern

“Marianne will certainly have to declare this second source of income to the Revenue. It is income that she must pay tax on and the Revenue enforces this rigorously.

“She should check with the club that organises her dancing shifts whether she will be regarded as an employee or if she should set herself up as self-employed.

“It is likely that she will be regarded as self-employed. She will, therefore, have to notify the Revenue and pay Class 2 national insurance contributions of £2.20 a week. She can pay this by standing order.

“Marianne’s is a fairly simple business and if she keeps a diary of what she receives on a particular day and keeps note of her expenses, she can just go through and add it all up at the end of the tax year. She should also keep her receipts and it is a good idea to have a separate bank account.”

SAVINGS & DEBT

Sue Hannums, savings manager, AWD Chase de Vere

“The best place for Marianne to start saving is with a cash Isa. Currently you can save £3,000 a year tax-free, increasing to £3,600 from April 6 next year. One of the best Isas on the market is with Egg, which pays 6.3 per cent on a minimum of £1.

“She could also look at moving her current account to Alliance & Leicester’s internet-only Premier Direct current account. It offers an in-credit interest rate of 6.5 per cent, fixed until July 31 next year, on balances below £2,500. It has a 0 per cent overdraft facility for the first 12 months, which could help Marianne to reduce her overdraft. After the first 12 months, the overdraft rate increases to 5 per cent, but this is one of the lowest rates on the market.

“As for Marianne’s credit card debt, it would pay her to clear this before she starts saving. She could look at moving to a 0 per cent deal, but most now have transfer fees – ranging from 1.5 per cent to 3 per cent – so she should work out what the transfer would cost her and make sure that it is less than her interest charges over the month.”

PENSIONS & INSURANCE

Tony Harris, managing director, Contractor Financials

“There is a danger for Marianne in being paid gross, as she could be tempted not to take this opportunity to get her finances in order.

“As a matter of urgency Marianne should obtain details of her employer’s pension scheme and join this, otherwise she is throwing away money that her employer is offering to contribute to a pension scheme on her behalf.

“Some health insurers will be wary of providing cover for a dancer, but WPA would provide comprehensive protection, allowing her access to the best Central London hospitals. Premiums can be reduced if Marianne accepts a voluntary excess, payable in the event of a claim. The cover could, therefore, cost her about £15 a month.

“An accident or illness could have a potentially devastating impact on Marianne’s current lifestyle and future plans, so she should find out what protection her employer provides if she cannot work. Marianne could cover up to about 60 per cent of her salary as a recruitment consultant, tax-free, with Norwich Union at a cost of £29.75 a month.

“Marianne can also seek help from the Professional Contractors Group. For a copy of its Guide to Freelancing, go to www.pcg.org.uk or call 0845 1259899.”

Marianne’s response

“I need to declare myself to the Revenue as soon as possible. I am glad to hear that I have three months from the time of starting, as this will give me time to organise a diary and folders to keep receipts and records, as suggested. This will be particularly important as I have to spend a lot on costumes and make-up.

“I am keen to pay off my overdraft and credit card before setting up pensions and savings, especially as I should be able to clear the debt quickly with the new income. I will work out how much it would cost to transfer my credit card balance to a card that is interest-free to see if this is worth doing.

“I clearly need to look into the best savings accounts so I can start saving for the future as soon as I have cleared the debts. At the same time I will look at health insurance schemes, something I hadn’t even been able to think about when all of my money was going to paying off debts.

“I am definitely feeling much more hopeful about the whole situation now.”

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