Are you looking to leave the 9-5 and control your own workflow?
Freelancing can be a great way to work on your own terms and grow your skill set, but if you’re unsure of what to do to launch your new career path, this article is for you!
We’ll walk you through the basics of freelancing, including finding clients, handling payments, and staying tax compliant while you operate. Read on to find out more and how Countingup can help.
How freelancing works
Freelancing is a type of self-employment where you offer your skills to employers on a more casual and flexible basis.
Freelancers can work in many industries and some typical examples include writing, graphic design, programming and marketing. Freelancers often work on short-term contracts to provide a service or produce an output for their employer. However, freelancers also work as consultants for firms.
How to get started
As you’re setting up a new business, you’ll have to register with HMRC. There are a few different ways of doing this, but the easiest and fastest way is becoming a sole trader.
Being a sole trader means you get to keep the profits you make and offers you a lot of flexibility as you run your business. Registering as a sole trader will allow you to pay taxes from your new business’ profits and get access to business support, like a dedicated business bank account and small business loans.
If you’d like more information on what other types of businesses you can register and create, find out more in our article How to set up your business: sole trader or limited company.
Choosing a business name
As a sole trader, you don’t have to choose a business name. However, it can help grow your freelancing practice by having adverts with a professional business title rather than your own name.
There are some rules to follow while choosing. Primarily, you’ll need to make sure the name you’d like to use isn’t already taken. Check for existing business names and trademarks using this online tool.
Once you’ve found a name that you like and is available, make sure to use it consistently on any future adverts, business cards, paperwork and your application with HMRC. This can help your business appear more professional and trustworthy to clients, and to HMRC if you’re ever audited. If you want to protect your business’ name to make sure no one else uses it, you can register to protect it.
Register as a sole trader by filing for Self Assessment. For detailed information on completing a Self Assessment, download our Comprehensive Guide: How to complete your Self Assessment in 3 simple steps.
For support and information on naming your business when registering, read our article How to register as a sole trader.
Business records you’ll need to keep
As a sole trader, you need to keep records of:
- The income and expenses of your business
- Records about your personal income
- PAYE records for anyone you employ
- VAT records (if registered for VAT)
- Grant money you may have received in 2020-2021 if you claimed through the Self-Employment Income Support Scheme because of the COVID-19 pandemic.
These records should be kept for at least five years after the tax year deadline.
For example, tax returns submitted for the 2021-2022 tax year by 31 January 2023 must be kept until at least 31 January 2028.
Over the next few years, with new Making Tax Digital (MTD) regulations coming into play, sole traders are expected to transition to digital bookkeeping. This means you’ll need to have accounting software for submitting tax returns each year. Finding the right digital accounting software will be key.
Read our ultimate MTD Income Tax guide for sole traders
Finding and managing clients
As a freelancer, your projects can range from helping small businesses to consulting for major companies. Therefore, using effective methods to advertise your services will be an important early step in your business venture.
If you currently have a career in the industry you’re joining as a freelancer, you may already hold a number of professional contacts. Through word of mouth advertising, dedicated freelancing websites like Upwork or Fiverr, or posting on professional platforms like LinkedIn, you can show potential clients you’re available for work.
Advertising your new business
Advertising your freelance business will depend on what industry you work in and whether you work with businesses or customers directly. For example, a freelance photographer could focus on product marketing for corporates, or with couples getting married. Using different advertising channels and methods will be important to make sure you reach your target audience effectively.
Whatever you choose, nowadays, many customers expect businesses of all sizes to have at least a website or social media account. Being online can help customers trust your business by letting them find important information like project rates, a portfolio, customer testimonials and how to book with you. Therefore, your new business may also benefit from advertising online. You can even do this in a way that still targets your local area. Find out more in our articles How to create a business website and How to use social media for business.
Other things to consider as you set up
Freelancing businesses are varied and specific industry advice might not fit everyone. For example, some business consultants may travel more to do hands-on sessions with clients, versus remote-working freelancers who do everything from home.
Below are some things to consider depending on your business’ needs:
- How can you provide additional value to your business: free consultation or pitch sessions? Comprehensive packages for further amends later in time?
- Do you know what items you can expense for your business to save on tax?
- Do you need business car insurance?
- Do you know how to set up a business from home?
Freelancing is easier with Countingup
Setting up a new business venture is time-consuming enough without the added drain of bookkeeping. Countingup is helping thousands of UK freelancers save time and stress when it comes to managing their finance.
Countingup is the business current account and accounting software in one app. It automates the time consuming aspects of bookkeeping admin and helps you keep on top of your records every day.
The Countingup app provides you with automated invoicing features, so you can get paid faster. And with the expense reminders and receipt capture tools, you can make sure your business’ records are always accurate and up to date. Find out more here and sign up for free today.