Freelance work

What is freelancing? It means working for yourself. You can work when, where, how and even if you want. That means it can be a great way of keeping up a career and combining it with a family, particularly when it comes to childcare.

In this guide:

Freelancing can go by plenty of other names such as self-employment or consultancy. Essentially you hire out your skills to employers on an ad-hoc basis. You trade in one boss for being your own boss, or for having lots of different bosses depending on which way you look at it! That means it can offer a lot of flexibility. Though that flexibility is rarely unlimited, for example, if you want more work for a client often you have to be able to do work when they need it done rather than when it suits you.

What sort of jobs can be done as a freelancer?

Almost anything! A record number of people are now self-employed in the UK in all sorts of sectors from construction and taxi-driving to IT and executive roles. It’s why there is increasing talk of a ‘gig economy’.

And the vast majority choose to do it – rather than being forced to because of redundancy for example – and report a high level of satisfaction with their lifestyle.

In a recent survey 81% of freelancers described themselves as satisfied compared to 61% of employees.

Do I need to set up my own company?

While freelancing and self-employment mean the same thing there are different ways of setting up on your own. You have to choose whether to be a sole trader or create a limited company.

A sole trader does what it says on the tin. You’re on your own and you are the company. If you make money it’s your money, if you get into debt it’s your debt. This is the most popular form of self-employment, all you have to do is go on the government website and register so they can send you the relevant tax numbers.

A limited company is a separate entity – even if you are the only director and shareholder. That means if the company goes bust your personal assets don’t come into play, you only lose what you put into the limited company.

And the tax rates for limited companies are kinder – you’ll pay corporation tax rather than income tax. But setting up a limited company comes with a whole lot of paperwork and legal responsibilities which if you don’t comply with can land you in hot water. You may need to pay an accountant to take on some of these duties.

Can I be self-employed and employed at the same time?

Yes. You may have a part-time job in which your employer arranges for your tax to be paid through PAYE and you get the benefits of permanent work but you could freelance the rest of the time. You could be in full time employment and run a business in your spare time or do other bits of work like taxi-driving or hairdressing on an ad hoc basis.It’s an increasingly popular way to live – some people call it a side-hustle, others go for the term ‘slashie’ as in being a photographer/dog walker.

What about tax?

If you’re a freelance and a sole-trader you have to pay your own tax by filling out a self-assessment form once the tax year has ended in April. You can do it anytime after April but it has to be submitted by the end of January the following year or you could be in for a hefty fine.

You can do it via the government website or there are a number of apps these days that allow you to keep track of your spending and your income and can then calculate your tax submit your self-assessment for you. You can also hire an accountant to take care of your finances who will do the same and might be better placed to keep your tax liabilities to a minimum.

Apps and accountants cost money of course but if keeping on top of receipts and such like isn’t your thing they might be worth considering.

You only pay National Insurance if you earn more than £6205 in a year. You can choose to make NI contributions even if you earn less if you want to keep up your record. The threshold for income tax is currently £12,500. Read more about freelancing and NI.

What are the benefits?

It puts the power over work-life balance in your hands. It can be great for spending more time with your kids and for saving on childcare costs. For example, depending on what you do it may be quite possible to work during the day and then give the kids your attention after school and return to doing some work in the evening after they’ve gone to bed.

Because you get to choose how you work it can also make for a more varied workload and that can bring added benefits in stretching yourself professionally. Many freelancers rate the extra skills and knowledge they develop as more important than what they earn.

What are the drawbacks?

You’ve got to go out and find your own work. Of course for some people that might be part of the attraction, particularly if you’re the sort of person who loves networking. But it’s certainly different to being an employee where you turn up to work and you know what you’ve got to do.

Your income may not be guaranteed and can go up and down. There can be a lack of financial security. That can cause problems with accessing benefits or applying for a mortgage for example. But because so many people are self-employed these days banks for example have measures in place to deal with that scenario.

And you have to make sure you get paid. Many companies are notoriously poor at paying invoices in time so you often have to invest time in chasing up your due.

It can also be lonely if you’re working for yourself. Think about how you’ll feel if say, you’re working from home, and don’t talk to another adult all day. But there are ways round this, there’s plenty of co-working spaces around these days where you can pay for a desk and get the buzz of being in an office without necessarily having to deal with office politics!

You also need to think about the stuff that employers provide but that aren’t immediately obvious. Pensions is a big one, you’ll have to budget for that. And there’s no paid holiday or sick leave for example.

Plus there’s issues like occupational health – no-one is going to check if your desk is at the right height or your chair is suitably ergonomic, you’ve got to take responsibility for your own environment and health.

What’s the key to success as a freelancer?

You’ve got to be willing to put yourself out there to find the work, or start with a strong network.And you’ve got to be organised. No-one is going to tell you which bit of work to prioritise, you have to work that out for yourself and keep on top of the paperwork such as invoices and receipts.

It’s widely believed that freelancers put in more hours than employees, but the trade off is that they get independence and flexibility and generally report being happier.

Further reading:

 

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Self Employed
Freelance

How to be a freelancer

Moving from permanent employment to freelance work can seem quite daunting, and there are some risks involved. Here we take a look at some tips to help you make the move. read more

 

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