Thinking Of Going Freelance? 5 Questions You Need To Answer
It’s no secret that since the start of the pandemic, everyone’s way of working has been turned upside down. For many, it was a positive change, and the longer they operated remotely, the more they wanted to make it permanent. As a result, we’ve seen a huge increase in the number of freelancers in the UK.
Becoming self-employed or starting your own business can be a great career move. You get to choose when you work, how much you charge, and the type of projects you take on. But, before you hand in your notice and go it alone, there are other things to think about.
Here, Workr Practice Manager and freelance specialist, Nina Lasota-Long, provides answers to five questions that you might not have considered. Read on to find out more…
1. Should I operate as a sole trader or a limited company?
When it comes to deciding between going self-employed or operating as a limited company, there are pros and cons to each.
Being a sole trader is viewed as the simpler and more straightforward way of going freelance. It’s ideal for short-term work or smaller projects, and the cost of accounting is much cheaper. That being said, you’ll need to complete an annual self-assessment and pay tax on your profits. There’s also no legal protection, so your personal assets are at risk.
You might find that some clients will only work with limited companies, and that operating as such adds more prestige to your business. You’ll get greater tax savings compared to self-employed individuals, and obtain more tax efficiencies as your earnings grow. There’s also limited liability, so the company is its own legal entity. But, there’ll be higher accountancy fees as a result of increased obligations.
2. How much do I charge?
Predicting the length of a project isn’t easy, so unless time is guaranteed, it’s wise to charge a fixed price. Once a fee is agreed, deadlines become flexible, preventing the client from asking for a discount if you finish the task early.
What exactly that price is, depends on how much you think your talent is worth. But don’t forget to cover your costs, as there’s a number of things you don’t get paid for, including:
- Quiet periods
Many clients will push for a bargain, but don’t take it personally. Going in cheap devalues your services and the rest of your industry, so bide your time and reap the rewards. Be sure to do some competitor research too, so you know you’re not charging over or under the average rate.
If you’re still struggling to put a price on your services, rate of pay calculators are a handy way to get started.
3. Will I be able to get a mortgage?
Regardless of success, lenders are likely to view those in full-time employment as a safer bet, and 21% of freelancers have actually reconsidered their job because of it.
Rejected applications appear on your credit history, so preparation is vital. Here’s a few tips to help you with the mortgage process:
- Understand your income – Mortgage lenders average out earnings, so you’ll need at least two years of accounts, ideally with a consistent or increasing profit.
- Use an accountant – This will help you plot out your finances and plan for a mortgage application.
- Avoid gaps in projects – Lenders like consistent patterns of income, so minimise significant gaps among your holidays.
- Complete self-assessment tax returns – These are evidence of your earnings and lenders will request at least three years of calculations.
- Check your credit history – Look for errors and make sure it correctly reflects your finances.
- Build up a bigger deposit – The more you can offer, the higher your chances of acceptance.
- Look for a specialist lender – These are experts in your employment type who’ll be more willing to consider you.
4. Can I freelance internationally?
The number of UK freelancers is going up, and as a result, many are widening their search and looking abroad for additional work. But if you’re thinking of taking on projects from clients in other countries, you’ll need to do the following:
- Hire an international solicitor to draw up a contract and help you navigate the different legal restrictions.
- Quote in the local currency, and make the client aware of their responsibility for international transfer fees.
- Check your professional indemnity insurance covers your client’s country.
- Use TransferWise. This provides you with bank credentials aligned with the client’s country, giving you better exchange rates.
- Prioritise work around time zones. Use the mornings for clients ahead of your time and the afternoons for those behind to maximise crossover periods.
- Check the tax situation in that country, and avoid paying income tax twice with a tax exemption form or Residency Certificate for your limited company.
There’s also a handy website you can visit for the opportunity to find international work and advertise your own talents.
5. What’s the best accounting software?
As the world becomes increasingly digitised, so should your business. Sending Excel spreadsheets to your accountant at the end of each year is a thing of the past. With modern accounting software, you can store invoices and expenses, and get real-time information about your performance.
Freelance Workr provide clients with a FreeAgent account to run your business from. We also use it to help you make important decisions, prepare your accounts, and complete VAT returns – leaving you to focus on the rest of your work.
Support from Workr
If you’re ready to take the next step in your freelance career, speak to Workr. Whether you’re setting up a limited company or becoming a sole trader, we can ensure you select the best option for your business.
Our team are also on hand to help you understand your earnings and estimate your weekly take-home pay. And, we offer expert advice, guidance, and access to a specialist mortgage advisor so you’re best placed to submit your application.Want to find out more? Visit our website or contact Practice Manager and freelance specialist Nina Lasota-Long at firstname.lastname@example.org.
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