Fundamentals of freelancing

Even though I hit the road to self-employment more than 20 years ago, I would not recommend it to everyone. If you definitely need that monthly salary cheque into your bank account, to pay your rent, mortgage or childcare commitments then perhaps going alone with a new business venture may not be right for you.

However, working for yourself or starting your own business is an exciting opportunity. You might want to become self-employed, so that you can spend more time with your family or so that you can focus on a hobby or project you’re passionate about.

A serious reality check

Becoming self-employed is a lot to take on. The Coronavirus pandemic has caused many people to rethink their lives. For some, this may mean starting their own business or working for themselves. By taking things step-by-step and getting advice and support when you need it, you can make your new business work for you and your family.

Take a sensible methodical approach. Break down your freelancing game and examine it piece by piece. Once you are sure you have a handle on each aspect, you’ll be on the road of your freelancing journey.

Organisation not perfection

Without the usual workplace rules and boundaries, it is important to work out how to freelance and develop a productive routine. For some people freedom is great, especially if you are a good self-motivator. But for many, complete flexibility can take a while to get use to.

The first step into the freelancing game is to define your skillset and believe in your ability to earn with your skills. Give yourself a firm goal for billable hours to clock up in the first month. How many days or hours you will be able to charge back to your client. This will help you calculate how much you need to invoice. Even if you tweak these once you get going, the goal itself can be enough to keep your business going.

Find your niche

This is possibly the most important part of becoming a freelancer. You need to define your services or skillset. Work out how much you are going to charge, either at a flat project-based fee, or as a daily (or hourly) rate.

Do some basic research and get a sense of the going rate for your services or skillset. Of course, it is going to depend on your level of experience, but there is no sense in charging rock-bottom rates only to find that a few months later you can't afford to pay your bills.

Sole trader or Limited company?

A key point. Need to decide whether to operate as a sole trader or form a limited company.

Typically, sole traders have less paperwork and more privacy than limited companies (although I do not underestimate the work you will be putting into your annual tax return). They do however carry a risk, for example debt and other financial liabilities.
Read up on what makes sense for your business, and don’t rush into a decision. Liaise with industry contacts and see what works for them in their first few years of trading.

Register for tax with HMRC

One of the US founding fathers, Benjamin Franklin, once suggested, that nothing can be said to be certain, except death and taxes.

Similarly, in the UK nobody can avoid tax. It pays to understand your responsibilities sooner, rather than later. Register with HM Revenue & Customs (HMRC) as soon as you are up and running. This is an essential step regardless of your business structure and something you can manage mostly online.

Dealing with HMRC can be a nightmare. One top tip: make sure you have an easy-to-locate email folder; as well as a paper-based one for all your early communications with HMRC. As you connect with them to pay tax across the year, you’ll need to provide certain details and login codes, and it can be tricky to locate everything.

Get insurance

If you’re largely working from home, a typical home and contents insurance policy might not cover you for your business activities. So it makes sense to look at tailored business insurance that’ll give your fledgling business things like professional indemnity insurance (in case you give faulty advice that causes financial loss to a client).

Good luck!

If you can tackle the principal elements of freelancing with a confident attitude (and lots of self-love), you’ll be ready to figure the rest out as you go. After all, it’s about the journey, not the destination!

Useful sites

UK Gov site – Setting up a new business