If you’ve recently made the decision to go freelance, you may be wondering where to begin with getting yourself set up for this exciting new chapter in your career.
To help aspiring freelancers cut down on what can seem like an overwhelming to-do list, Rose Buckler, Head of Business Banking Operations at Starling Bank, shares her tips on the key priorities to think about when getting started.
Decide between setting up as a sole trader or limited company
When going freelance, one of the first decisions to make is whether to operate as a sole trader or a limited company.
As a sole trader, you have to register for a self-assessment tax return and present your income, expenditure and profits. You’ll pay National Insurance contributions and Personal Income tax on profits over your individual tax free allowances. A benefit of being a sole trader is that you generally have less paperwork, but once you’re turning over a certain amount, you could end up paying more tax than limited companies.
For limited companies, you’ll need to register with Companies House and any money withdrawn from the company must be formally recorded as a salary, dividend or loan. The company will pay corporation tax on taxable profits and you’ll pay income tax on any salary or dividends paid to you personally by the company. If you have personal assets, such as property, a benefit of being a limited company is that your personal assets are protected against company debts, which is not the case for sole traders. Something else to consider is that some of your potential clients may have a policy of working with limited companies only, not sole traders. So it’s worth doing your research before deciding which option is best for you.
Apply for a business bank account
Depending on whether you have opted to set up a limited company or work as a sole trader, you will need to think about how to manage your working finances. While it’s not a legal requirement to have a business bank account as a sole trader, it is a good idea to have one to separate funds from your personal finances. In the case of limited companies, it is essential to have a separate business account in order to maintain clear and accurate financial records.
Some business accounts offer features designed to make banking easier for small businesses. For example, Starling Bank’s Business Toolkit (just £7 per month) offers the ability to manage invoices, bills, tax and VAT from one bank account, so everything is simplified and managed in one place. It is important to remember that your business account is not your personal bank account, so it will need to be managed differently and kept separate from your personal spending.
Set your rate
When you are starting out, do some research on what the going rate is for the service you’re providing. Speak to connections in your industry, ask a former boss, look at salary surveys online. In particular, if you know anyone in a role whose job it is to put together a budget, ask them how much they would charge for what you are offering.
However you choose to establish this information, if you have an idea of what you should be being paid for your time and expertise, you’ll feel much more confident in negotiating your fees. Equally, don’t feel that you need to offer your rate first. When entering discussions about money, ask the client what the budget for the project is – you may find that it’s higher than what you were planning to offer, and it’s not necessarily based on a day rate.
Build your network
Freelancing can be a lonely experience, especially if you’ve been used to working surrounded by a network of colleagues, so it’s important to build a new network of your own that you can lean on for support.
There are plenty of groups and organisations out there that have been set up for exactly this purpose. For example, Doing It For the Kids is an established organisation for connecting freelancing parents with young kids to one another. Even just setting up a small WhatsApp group can offer a huge amount of support as you go on your freelance journey.
Reflect on how you work best
Perhaps the biggest advantage to becoming a freelancer is that you are now in charge of your own time. Try to find a way that helps provide structure to your day, which will motivate you to get through your tasks.As you’re starting out, make sure you take some time to reflect on the best working style for you, and how you’re going to replicate this during your working hours and processes. What time of the day are you at your most productive? Will you need to factor in client office hours and meetings? What is going to motivate you to get tasks done? Make your freelance role work for you.