Freelancing: it conjures up the romantic idea of liberation from the daily grind of being an employee. As a professional in technology, this can bear a modicum of truth - the chance of flying solo as a freelancer removes specific barriers that make it achievable to work on projects that interest you, negotiating prices that generally leave employee salaries faltering in the dust. In this post, I’ll superficially highlight the various traits of freelancing and the responsibilities that entail being a sole trader in the UK.
- Be your own boss.
- Work when you want.
- Work with whom you want.
- Work on projects that interest you.
- Deal with less admininistrative overhead with sole trading than a limited company.
Yes, there’s always a catch to seeing increases in available time and money earned:
- Your work’s primary limitations are governed by your skills to market and sell yourself as you become the business.
- You’ll have to find suitable clients and projects by yourself.
- Once you’ve hunted them down, you’ll have to justify your worth and trust with the other party in a way that encourages them to seal the deal with you. For this, I highly recommend reading Dale Carnegie’s How To Win Friends and Influence People. This book has sound principles and time-tested advice on making a social impact with people, including clients and team mates.
- All the responsibility is down to you - if you fail, your reputation suffers. Therefore, make sure your quality meets or exceeds your clients’ expectations.
- There is administrative overhead compared to the simple life of being an employee; what your employer used to take care of now becomes part of your work.
Probably the part you’re most interested in: what’s the setup like as a freelancer?
If like me your social history has been completely devoid of any contact with an accountant until now, congratulations on making it this far without one. Going forward, you’ll need to team up with a specialist whom can advise you on the administrative side of your self-employment status: particularly the finances, taxes and their deductibles.
Keeping track of your income and expenses will need to become a regular behaviour in order to remain organised. This means carefully storing copies of receipts and invoices related to your work to prove your financial movement to HMRC. To help you determine what can be claimed as tax-deductible, there’s a worthwhile document listing different expense categories from Freeagent.
A decent accounting firm will offer you free software (such as FreeAgent) to help you keep track of the above. They’ll also offer help with other aspects such as what to write in an invoice template for a client. There are many suitable accounting firms out there that Google will surface. As an example, I’ve been recommended Crunch time and time again. However, always choose one according to the types of income you expect to earn and need advice on.
Tax Status Registration
As a British sole trader, register for annual self-assessment tax return with gov.uk.
A useful guide on business insurance policies for the UK market can be found at Money.co.uk. As a freelancer, since you are the business, you need to make sure any policy you take includes both of the following two to protect you from potential lawsuits:
- Professional indemnity insurance, which covers you in case one day a client says ‘Your work is terrible and it’s damaged my business! I’m going to sue you!’ and similar scenarios.
- Public liability insurance, which covers you in case someone, be that a client or a member of the general public says ‘You hurt me! I’m going to sue you!’. It’ll also cover ‘You scratched my laptop, I’m going to sue you!’ and other similar scenarios. Always read policies thoroughly before purchasing.
That’s pretty much all there is to it.
To put things into perspective, there’s a more advanced level to tease your aspirations: setting up a limited liability company. This is where your business is legally seperated from you, consequently giving freedom to grow your business as a very real and exciting outcome. Naturally, this comes with additional responsibilities and complexity… but we’ll have to discuss this another time. If you’re going to take the plunge, the best advice is to start as a sole trader and upgrade to a limited company as you learn more about your business needs and capabilities.
Best of luck, fellow solo flier!
Note: This article has been written based on my knowledge at time of writing however I bear no responsibility for actions taken as a result of this article. Circumstances may change, especially in light of impending Brexit legislation, therefore it is wise to consult a small business solicitor for official legal advice.