The gig economy is growing rapidly. In the UK, it included 2.4 million people in 2016, nearly doubling to around 4.7 million in 2019. And recent estimates predict a continued growth to 7.4 million in 2022. 

With all these people involved, there must be some decent money in it, right? Well, yes, if you can find it. Let’s take a closer look at the gig economy and how to make money in it. 

Specifically, we’ll be covering:

  • What is the gig economy? 
  • How do I make money in the gig economy? 
  • How Countingup can help you navigate the gig economy.

What is the gig economy? 

The gig economy can be defined as an economic system characterised by short term contracts and freelance services, often referred to as “gigs”. 

Traditionally, employees would stay in one field, even one company, for their entire professional lives. Nowadays, however, employees can move around, work remotely, and have multiple jobs or side hustles at the same time. 

Uber and Deliveroo are the two most prominent examples, but these “gig” based businesses can now take many different forms. Generally speaking, we can split them into three categories:

Freelance agencies

Employers offer contracts on a fixed term or ongoing basis. The rate of pay is negotiated between the agency and the contractor. Working through freelance agencies usually means you’re self-employed, so you’ll have to complete a self-assessment tax return

Freelance websites and apps

Like agencies, but a little more relaxed. Websites like Fiverr and Craigslist allow private individuals to sign up and request/offer their services to one another. They are not beholden to any overarching company. It’s an agreement between people who set their own prices. 

Apps like Uber and Deliveroo are similar, but their pay rate is set by the app itself and depends on availability and distance travelled. Both apps charge their users a percentage of their total earnings, like a subscription fee. 

Working through freelance apps and websites means you’re self-employed, so you’ll have to complete a self-assessment tax return.

Umbrella companies 

They employ freelance workers on temporary contractors. The main difference is that an umbrella company will act as your employer. So, they will be responsible for income tax and national insurance contributions and often deduct fees for running costs. 

How do I make money in the gig economy?

The specifics of making money in the gig economy will vary depending on your chosen field, as will your overall earnings. However, there are several good practices that are applicable to everyone.

It essentially boils down to pricing your own work, figuring out what your time is worth, and then using that time as efficiently as possible to maximise your earnings. 

And it’s easily done by following a few simple steps:

Decide your annual pay

Base this off industry standards. You can base this on your past experience in the role, or find out online what’s typical for someone in your industry.

Remember, this isn’t wishful thinking. It should be a realistic and achievable amount based on your skills and experience.

Figure out your overheads

Next, calculate the approximate cost of your business operations over one year. 

Some common expenses include:

  • Accounting and bank charges
  • Office or workspace rental
  • Vehicle costs like insurance, fuel, servicing
  • Work clothing, like protective gear, a uniform, or just professional outfits.
  • Equipment 
  • Website running and subscription fees
  • Marketing and advertising 
  • Stationery 
  • Business insurance costs
  • Subscriptions to any software or services 

If you’re not sure, you can ask others in the same field what they normally spend. If you’re estimating, best to guest on the higher side so you’re not caught off guard. 

Remember, a lot of these can be claimed as expenses, meaning you can deduct them from your taxable income when submitting a Self Assessment tax return. 

Decide on a profit margin

As you’re running a business, you’ll be entitled to profits on top of your salary. 

There’s no hard rule on the amount, and will vary depending on your industry, but somewhere between 10% and 20% is pretty standard. 

Your profit is added to the cost for each job, on top of the normal costs like your salary and expenses. 

How many hours will you work in a year?

Chances are you’ll not be working seven days a week, 12 months a year. So schedule time off for yourself.  This should include breaks, weekends, and holidays. But factor in a few extra days for unexpected absences – they’re sure to come up for one reason or another. 

For example, say you decide to allow yourself 30 days. That equates to six working weeks. So,

of the available 52, you’ll be working 46 weeks of the year.

If you settle on a 40 hour working week, you can then find out your “billable hours” for the year.

(46 weeks) x (40 hours) = 1840 billable hours for the year. 

Finally, figure out your daily or hourly rate

To figure this out we need to do a little maths with these figures:

Salary: (£50,000) for example

Profit margin: 10% 

Overheads: (£10,000) for example

Billable hours: 1840 hours

First, add together your salary and overheads:

£50,000 + £10,000 = £60,000

Then, add your profit margin to get your total annual income:

10% of £60,000 = £6,000 

£60,000 + £6,000 = £66,000

Finally, divide this figure by your billable hours to determine your hourly rate:

£66,000 / 1840 = £35.86 (might as well round it up to £36)

Multiply this number by 8 (hours per day) to get your daily rate:

£36 x 8 = £288

Now that you’ve determined your hourly/weekly rate, you just need to find some clients and start earning. 

How Countingup can help you navigate the gig economy

The gig economy has changed everything. For some, it’s an exciting new opportunity. For others, it’s a challenging new idea, 

One thing that hasn’t changed is the need for proper financial management. Things like tax returns, financial compliance, and good bookkeeping will always be a part of business.

The Countingup business current account makes it easy to manage all your financial data in one simple app. The app comes with free built-in accounting software that automates the time-consuming aspects of bookkeeping and taxes. 

You’ll receive real-time insights into your cash flow, profit and loss reports, tax estimates, and the ability to create invoices in seconds. 

You can also share your bookkeeping with your accountant instantly without worrying about duplication errors, data lags or inaccuracies. 

Seamless, simple, and straightforward. Find out more here.