Practical Guide to Going Freelance in 2021
28 October 2021
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Currently there are over two million active freelancers in the United Kingdom.
Research from the Office for National Statistics (ONS) shows the number of self-employed people (including freelancers) in the UK has risen over the last two decades. It increased from 3.3 million people (12.0% of the labour force) in 2001 to 4.8 million (15.1% of the labour force) in 2017.
How has the coronavirus affected freelancers?
COVID-19 has affected everybody and the freelance market is reflective of the current business climate. Sectors such as hospitality, tourism, high-street retail and the arts have been hit hard, which has an effect on freelancers who work in them too.
It's not all doom and gloom. Because of the pandemic, businesses are now less likely to hire new full-time employees. Instead, they choose to employ freelancers on a per project basis when the need arises.
Benefits of going freelance
- You can work the hours you want
- You can enjoy more freedom
- You can pick the jobs you want
- There is plenty of variety of tasks
- You're the boss
- It can be very profitable
Setting up your business: consider a sole trader or a limited company
If you become a freelancer, you basically have two options as to how you legally form your business: a sole trader or a limited company. There are advantages and disadvantages of both, but it's always best to get professional advice before deciding on the route to take.
What is a sole trader?
A self-employed person who is the sole owner of their business. It's the simplest business structure around, making it one of the most popular.
What is a limited company?
A business structure with its own legal identity. One that's separate from its owners, shareholders and directors.
Sorting out your tax as a freelancer
If you're employed, your employer usually takes care of paying your taxes through the Pay As You Earn (PAYE) system. As a freelancer, you're responsible for paying your own taxes. Some freelancers do this themselves, while others choose to use the services of an accountant.
Sole trader and tax requirements
If you go freelance as a sole trader you need to register for and file a self-assessment tax return. This assessment calculates how much tax and National Insurance you owe based on your income and expenses and must be completed every year.
Limited company and tax requirements
A limited company's finances are a bit more complicated. First you have to register on Companies House and inform HMRC that you're operating as a limited company. As you are technically an employee of the business, you also have to set up and register a PAYE scheme.
Kinds of insurance freelancers need
If you become a freelancer, you might want to consider taking out freelancer insurance. Accidents happen, and no matter how excellent you are at what you do, we all make mistakes. Having insurance from the start could help protect your livelihood and reputation if the worst scenario happens.
Two of the common insurances used by freelancers are professional indemnity insurance and public liability insurance.
Public Liability Insurance for freelancers
This covers the compensation costs and legal fees you are required to pay if someone is harmed, or their property is damaged, because of your business activities.
Professional Indemnity Insurance for freelancers
Professional Indemnity Insurance covers you if a client claims your advice, work, ideas or designs harmed their company or caused them a financial loss.
Here are a few more freelance tips to consider:
Set up a workspace at home
A dedicated workspace is important for any freelancer working from home. It will help you to be more productive, since there are less distractions from what's going on elsewhere in your home.
Having a separate workspace also allows you to set it up exactly how you'd like it to. This makes you more comfortable if you're spending long hours staring at a screen. You'll create a better work-life balance, and you'll find it easier to separate these two.
Establish a routine
When you're working from home, it's important to create a daily routine. This makes it easier for your clients to know when they can get in touch with you and helps give you structure. Do your morning tasks as if you were going into work normally, and work to finish at a set time every day and log off like you’re getting off work. Although with some jobs you'll be burning the midnight oil, at least you'll be earning money.
Is freelancing right for you?
Freelancing isn't for everyone and you should definitely consider your own circumstances before making the jump.
