Connor Campbell
Hannah Nemeth
According to IPSE, the Association of Independent Professionals and the Self-Employed, the number of freelancers is growing. In 2023, 2,046,000 freelancers were operating in the UK, 11% more than in 2022, contributing an estimated £169 billion to the country’s economy.
But what is freelancing? Put simply, it is a form of self-employment, where you have the flexibility to pick and choose your clients and work on multiple projects at once.
While the term once referred to medieval mercenaries who would fight for whoever paid them the most, now things are a bit less bloody. Writers, designers, accountants and even lawyers can all ‘go freelance’ and carve their own professional path.
Below, we take a look at what you need to be aware of before becoming a freelancer, the pros and cons of freelancing, and what kind of work it can cover.
What is a freelancer?
A freelancer is anyone who has the flexibility to work for multiple clients, on multiple projects.
As a freelancer, you:
- are typically paid through invoices rather than a wage and charge a day rate or hourly rate for your services
- are legally protected by the terms of the contract with your client
- will likely look after your own income tax and National Insurance arrangements
- may not be entitled to the same workers’ rights as a full-time employee, such as sick pay or the minimum wage
- are entitled to safe working conditions
- are protected against workplace discrimination (in some cases)
» MORE: Best freelance jobs
What business structure do I need as a freelancer?
When working as a freelancer, you can choose to operate as a sole trader or a limited company.
Freelancing as a sole trader
Since freelancing is a form of self-employment, the most obvious route to take as a freelancer is to operate as a sole trader. You will only need to do this if you earn more than £1,000 in profit from your freelancing across the tax year, for example 6 April 2024 to 5 April 2025.
As a sole trader, you will need to choose a business name and register for self-assessment. The self-assessment tax return is how you pay your income tax and National Insurance contributions, and you would pay yourself by withdrawing money from the account you use for your business.
As a sole trader, it is important to know that you and your business are considered the same legal entity, and that you are personally liable if something goes wrong.
Freelancing through a limited company
Some freelancers may choose to set up a limited company, rather than operate as a sole trader. This is sometimes known as a personal services company (PSC).
This would give you limited liability, as you are a separate legal entity to the business. For some people it can work out as more tax efficient than operating as a sole trader.
However, running a limited company requires more paperwork, including filing company accounts and tax returns to HM Revenue & Customs (HMRC). You should also read up on IR35 rules to ensure you understand the tax implications of doing freelance work through a limited company.
Can I freelance on the side?
It is possible to do freelance work alongside full- or part-time employment. You should check your contract first, however, to ensure that you are allowed to take on outside work.
If the combined income from your day job and your freelance work exceeds the tax-free personal allowance of £12,570, you will need to declare it to HMRC. If your side-hustle income is over £1,000, you will be required to submit a self-assessment tax return, in which you will need to disclose the tax you have already paid on your non-freelance earnings, such as your salary from a full- or part-time job.
Benefits of freelancing
While it might not be for everyone, freelancing can be very appealing for people who want to take control of their work life.
Work with who you want, on what you want
Although there may be times when you need to take any old job to pay the bills, as a freelancer you have the freedom to pick and choose your projects and clients.
You can constantly keep work exciting by taking on new challenges. Or you could make life easier by working on projects you know you can comfortably complete. That’s the brilliance of freelancing – it’s entirely up to you.!
Work where you want, when you want
It’s not just the freedom to choose what you work on, but when and where you do it too. As long as you are meeting the deadline set out in your contract, you can pick and choose your hours and ‘office’.
You’re a night owl? Great, you can work into the wee hours of the morning instead of being chained to your desk nine till five. Fancy an exotic setting? Lounge by the pool and use the hotel’s wi-fi to get the job done.
Of course, you’ll need to be sensible some of the time, especially if you are working on anything confidential or sensitive.
Keep the profits of your labour
Since you’re working on your own, once you’ve paid any tax due on profits you make from freelancing, the rest is yours and yours alone. It means there is a more direct link between working hard and being rewarded for it. You can scale your freelance workload as and when you need to.
Earn money on the side
As long as you have your employer’s approval, freelancing can be a great way to make some money on the side. Just make sure you submit your self-assessment tax returns to keep on the right side of HMRC.
Disadvantages of freelancing
However, with the freedom of freelancing, comes a lot of responsibility and risk.
No guarantee of work
While you have the flexibility to work how and when you want as a freelancer, you also have the burden of sourcing that work yourself. This could lead to drier periods when you’ll struggle to secure enough contracts to pay your bills.
If hustling for every job doesn’t suit your personality, then you may want to rethink a career as a freelancer.
Irregular payments
Follow enough freelancers on social media, and you will quickly start to notice how common the problem of late payments really is. This means it can be hard to manage your personal finances, such as rent or mortgage payments, as you can’t guarantee exactly when your money will come in.
You should be aware, however, of the late payment of commercial debts legislation, which allows you to charge ‘statutory interest’ on the unpaid amount after a certain period of time has elapsed.
If you have not specified a payment date, the law says that your payment is classed as late if it is unpaid 30 days after either the customer gets the invoice or you deliver the goods or services (if this is later than the invoice date).
If you have agreed a payment date, typically you could start claiming interest after 60 days for business transactions, or 30 days for public authorities.
The rate of statutory interest is currently 8% plus the Bank of England’s base rate for business-to-business transactions. As well as this, you can charge a fixed sum, scaled to the amount of debt, for recovering a late commercial repayment.
Everything is your responsibility
From keeping track of your income and expenses and filing a self-assessment tax return to marketing your services or chasing payments, you are responsible for everything when it comes to working as a freelancer.
You may feel isolated
If you thrive in a team environment, or need a colleague to bounce ideas off, then freelancing might not be for you. It can be a lonely job, with minimal interaction between you and your client once the brief has been delivered and the contract signed.
Seven examples of freelance work
There are countless industries suited to freelance work. Below are some examples of professions where freelancing is common.
Writing
When you think freelancing, your mind may first go to writing. From copywriting and technical writing to SEO content, there are a range of opportunities for a freelance writer.
In fact, based on IPSE’s most recent data, ‘artistic, literacy and media occupations’ make up 16% of all freelancers in the UK, more than any other industry.
But, as any good wordsmith knows, writing is a team effort. Proofreaders, editors, and translators are just as suited to freelance work.
Education
Teaching is the second biggest freelance occupation in the UK, with 154,000 individuals as of 2023. This could be working as a private tutor to help someone through their GCSEs or A-Levels, teaching English as a second language, or helping someone learn how to play a musical instrument.
Design and creative
Besides writing, there are a number of other freelance options in creative industries, including graphic design, photography, video editing and more.
Marketing and PR
Rather than work in-house or at an agency, you could set up as a freelance social media executive, marketing consultant or PR manager.
Financial services
Getting your head around your personal or business finances can be tricky. That’s why bookkeepers, accountants, financial advisers and business consultants can all thrive doing freelance work.
Programming and development
Programmers and developers can work on a wealth of projects as a freelancer, including web and user experience (UX) designers.
Legal
In 2019, the Solicitors Regulation Authority (SRA) introduced regulations that allow solicitors to offer their services as freelancers. Although your practice does not need to be authorised, you will need to inform the SRA if you do decide to work as a freelance solicitor.
» MORE: What does solicitors’ professional indemnity insurance cover?
Freelancing checklist
Before diving into freelance work, it is good to ask yourself the following questions to make sure that you have everything in place you may need:
- Have you calculated the appropriate day or hourly rate you can charge for your services?
- Have you informed any required regulatory bodies about your freelance work?
- Do you know who your target audience is?
- Do you know where you will start finding clients?
- Have you compiled a portfolio of your work to show to prospective clients?
- Have you considered a business bank account to keep your freelance and personal finances separate?
- Are you aware of the different types of business insurance that are recommended, or required, for your profession?
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