The gig economy is growing. According to research from IPSE, 1.8 million people now work as a freelancer in the UK, that’s a rise of 36% since 2008. People are attracted to freelancing for lots of reasons: it gives them greater flexibility over the work they do; they can have a better work-life balance; and it can be a good way to get out of a corporate environment. If you are considering becoming a freelancer, this post will give you some tips to make sure you get off to the best start.
1. Choose the right business type
When you start working as a freelancer you are setting up a business. However, from a legal and tax point of view, there are different types of business you can set up and it is important that you choose the right one.
For a freelancer who works on their own, there are two basic types of business, limited company and sole trader, and each has its pros and cons. Limited companies offer distinct tax advantages and protect you from personal financial losses, however, they have more legal responsibilities and require much more work when it comes to completing financial accounts. Sole-traders only have streamlined financial obligations in comparison but do lose the tax advantages. They also risk their homes and possessions if the company cannot afford to pay its creditors. For more information visit the Gov.UK website.
2. Tell the taxman
When you set up as a freelancer, you are obliged to tell HMRC straight away. If you run a limited company, you have to pay yourself through PAYE and so will need to set up an account with HMRC to pay your tax and your National Insurance.
If you decide not to set up a limited company, you will need to register as a sole-trader. When you do this, you will receive a Unique Tax Reference (UTR) number and will have to register for self-assessment and Class-2 National Insurance contributions.
Many of the things you need to do for the HMRC, like filing accounts, completing tax assessments and even making payments, can be done online. However, it can be challenging and stressful if you do not know what you are doing. It is always advisable to seek professional advice from an accountant. If you run a limited company, your accounts must be completed by an accountant.
3. Get online accounting
You don’t just need records of your financial transactions for the HMRC, you also need them for yourself. It is vital that you have a complete picture of your business’s finances so that you know where you stand. Failure to do this can cause your freelancing business to run out of cash or even collapse altogether.
One of the best ways to keep your records up-to-date is to use accounting software, which is now widely available online. Websites like QuickBooks and Sage Online can make accounting very simple. They can connect with your business bank accounts, send invoices, create cash flow charts, and produce profit and loss accounts – all with the absolute minimal input from you. This helps saves your time, effort, money and stress.
4. Get insurance
It doesn’t matter what business you run, you need to have insurance. Whilst you might be thinking about the need to insure your stock or your equipment, you must also think of liability insurance. If someone is injured through your work or if you cause damage to property of loss of income, you could be looking at a lawsuit worth millions of pounds. Liability insurance can protect you against these.
Luckily, liability insurance can be relatively cheap (unless you run a business with obvious risks, like a skydiving instructor) and many providers now tailor their insurance packages for specific types of business.
5. Open a business bank account
Unless you run a limited company, there is no legal obligation to have a separate business account from your personal account. However, it can get very messy sorting out your business and personal finances from each other if you do not – especially if you are asked to provide details of your banking for tax purposes.
At the same time, if you use the online accounting programs we mentioned above, you will need separate business and personal accounts as they analyse the payments in and out of your account to do many of their calculations – this is impossible to do when business accounts are not kept entirely separate.
Business accounts are usually charged for but costs are minimal and many are free in the first year of setting up your business.
6. Always have business cards handy
Business cards are an essential for every freelancer. Opportunities to get new clients arise at the most unlikely of times, often with chance encounters. Having a business card available means you can give someone your details there and then, without having to scribble your name and contact number down on the back of an envelope.
You can design your business cards online at sites like Vistaprint, and have them printed and delivered to your door. The prices are very reasonable. You can even design your own logo as part of the process.
7. Ensure you have website
One of the biggest advantages for many freelancers is that your business isn’t limited by geographical boundaries. Much of the work freelancers do can be done online and this means that you have the potential to work with clients across the globe. Of course, to do this, it is important that you have an online presence where potential clients can find out all about your services, how much you charge and how to get in contact.
A website is essential, therefore, for freelancers working online – and setting one up has never been easier to do. You don’t need to go to the expense of having a website built for you, either. With drag and drop website building at your fingertips, using an online website creator, like Amazing.Website, makes it simple for any freelancer with no previous experience to get their business online in no time. For the more technically minded, there are programs like WordPress and Joomla that can be used to make outstanding, feature rich websites, too – also without the need to use computer coding.
Do remember, if you have a website, you’ll need to find a reliable web host. Choose one that can keep your website secure, make sure it stays online and which can also provide you with 24/7 technical support.
Hopefully, these tips will have given you a clearer picture of what you need to do when setting up as a freelancer. You’ll have a better understanding of the legal and financial responsibilities and how to insure yourself against some of the risks that businesses can face. At the same time, you’ll understand how easy it can be to create business cards and websites to help promote your business.
If you are a freelancer looking to launch a website, consider using our Amazing.Website site builder, or if you intend to build a website using another platform, look at our affordable business hosting plans.