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Freelancing in the UK

There are as many as 4.5million freelancers working in the UK. If you’re contemplating becoming a freelancer the guide below outlines the pitfalls and up sides involved with making the step and covers insurances, structures and tax to name but a few.

Becoming a freelancer

Becoming a freelancer could be the most rewarding thing you’ll ever do. If you’re passionate about your craft and if you understand how to market it, becoming a freelance writer, photographer, or whatever you choose lets you make a living from that passion. Who doesn’t want to get paid for doing do what they love?

One of the most difficult things is getting started and to keep the momentum going.

Is it right for you?

If you’re leaving a job to start your own business you need to prepare for a shift in perspective and priorities. You need to assess the responsibilities, commitments, and personal ‘non-negotiables’ that, when combined, map out your lifestyle and circumstances.

A few obvious things here are family commitments and financial responsibilities.

With regular pay you have regular income, and often as a result of that secure income you start building up liabilities like rent or a mortgage and all those direct debits you know are going to go out each month. Potentially giving up a regular salary you will need to have a complete picture of your in and outgoings, and minimise the risk of missed payments.

Self discipline

For some people the freedom of becoming your own boss is great, especially if you’re a good self-motivator. But for many, complete flexibility can take a while to get used to. Before you hit day one of freelance life it’s important to have a plan. Give yourself goals for billable hours to clock up in the first quarter, or a target for how much you need to invoice.

These can be tweaked once you get going and start realizing the model you are working to.

Routine is important. Set time goals, have a decent breakfast, and get dressed. Working from a client’s office once a week can add a bit of expectation and structure.

Charge out rates

Research is important to get a sense of the going rate for your services or skillset. This will depend on your level of experience, but there’s no sense charging a lot more for a service that can easily be procured for a better rate.

Remember the importance here of building up a good reputation and referrals. Earn the respect and trust of a group of solid clients with reasonably charged work, executed to brief, on time and to a high standard. They’ll be far more likely to agree to pay a bit more when you review your prices a year in. Building a solid reputation is as important as the work itself.

Insurance

If you’re largely working from home, a typical home and contents insurance policy might not cover you for your business activities.

Here are some examples of the insurance cover available:

  • Professional indemnity

Professional indemnity is designed to protect your business against the cost of settling or defending a client’s claim that there is a problem with your work. For example, you may have given incorrect advice or made a mistake in your work. Although nobody likes to think that this kind of thing will happen to him or her, it can and does. And the impact on small businesses can be great. Even if a claim is unfounded, the process of battling it can be expensive, time-consuming and disruptive. So it’s wise to cover all bases with an insurance plan.

  • Public liability insurance

If you’re self-employed, public liability insurance can protect your business against the cost of settling or defending a claim for bodily injury or property damage from a client or member of the public. For example, if you have members of the public on your premises, it is important to ensure you have protection in place should they trip over a piece of your equipment and injure themselves. This can also apply if you visit them on their premises and, as an example, damage some of their property.

  • Personal accident insurance

Personal accident insurance covers your business in the event that you are unable to work as the result of an accidental bodily injury. It protects against the financial impact of this by providing your business with a lump sum or weekly amount. It’s designed for those whose business would struggle should they or a key member of their staff find themselves unable to work, and offers protection against income loss, whether that’s from a short-term injury or a serious accident with long-term implications. Personal accident insurance for self-employed people can offer a real life-line due to there being no employer to fall back on should they find themselves unable to work

  • Office insurance

Whether you work from home or an office, our office contents insurance policy protects your business against the cost of replacing or repairing your business equipment if it is accidentally damaged, lost or stolen. You can also add a range of specialist covers to your policy such as portable equipment (e.g. laptops and phones).

Clients

Always think how much work you can take on as one person, but before you take the plunge and become your own boss, it’s important to have some idea of who your first clients might be, or where to find them. Get to know your target market and do some research. Researching beforehand is invaluable in order to best understand your market place and target clients.

Marketing plays its part too, but word of mouth and networking is vital to build relationships and increasing your portfolio.

It’s important to remember that you must register with HMRC and identify that you are now self-employed: sole trader or a limited company. This is vital so your tax returns are accurate.