Thursday 17th June, 2021
There are currently around 4.4 million self-employed workers in the UK. Even after a slight drop off during the last year's lockdown, more and more Brits are seeing the light of this new way of working.
But there's a catch - now you're responsible for a business! When you're just setting out in the weird and wonderful world of self-employment, it can feel a little intimidating. How do you pay taxes? How do you manage invoices? Do you need a freelancer pension?
All fair questions, so we thought we'd lend a helping hand. To celebrate this year's National Freelancer's Day, here are 6 must-know tips for being a freelancer in 2021!
Let's start with the boring bit. Making sure you're registered and legally compliant.
It's vitally important that you let HMRC know you're going solo. This lets the government know you'll be submitting a self-assessment tax return. If you're planning on operating as a limited company, you'll also need to register with Companies House, making your business information available to the public.
Getting all the ducks in a row before you set out is going to make things a lot easier in the long term. For a complete run down on what you need to do, check out our article on starting out self-employed.
When you're pitching for work, it's important to remember you're probably not the only one. Businesses are looking for someone they think can do the job well for a reasonable price, but also someone they can work with on a personal level.
Going above and beyond during the initial discussions can really go a long way to seal the deal. Think: what can I offer that will be genuinely helpful for this client? Have I given them everything they need?
Life can be busy as a freelancer, and it's easy to get caught up in your day to day tasks. However, this can lead to you becoming lost.
Noting everything down somewhere can really help. Keeping track of things like who you're working with, invoice dates and so on gives you one place you can go to every day to see how things are going. It doesn't have to be complicated, even simply putting everything in a spreadsheet is a great way to take control.
Tracking what's going on can help you spot trends, such as which times of year you're busiest or when you can charge more. As legendary business guru Peter Drucker once quipped, "What gets measured, gets managed."
When you're employed, your taxes are taken care of for you for the most part. They come directly out of your pay packet before it reaches you, meaning you don't really notice the difference. Being a freelancer, however, is different.
Now, you're responsible for paying taxes yourself. Handing over 20% of your hard-earned pay isn't fun, but thankfully, there is a way to soften the blow.
Rather than having to pay your tax bill in one go, try saving as you go. Putting money for taxes in a separate pot right away is a great way to make sure you're covered come tax year end. Our partner TaxScouts have a tax calculator for the self-employed that you can use to see what you might owe based on your yearly turnover. Plus, putting money aside as soon as you receive payment means you won't have the see the money ready to spend in your current account.
For more help, check out our complete guide to self-employed taxes.
Speaking of putting money aside, let's talk emergency fund.
Being freelance means embracing the unknown - your workload will probably vary month to month and there may be certain times of year when income drops. The best way to prepare for this is to save some money for an 'emergency fund'.
The general rule of thumb is to have 6 months of expenses saved in an easy access account, available whenever you need it. We know 6 months of savings can sound a little daunting, but remember you don't have to save it all at once. Just save as much as you can each month and before you know it, your emergency fund will be ready.
Just remember to top your fund back up anytime you use it!
Saving for life after work probably feels like the last thing on your to-do list. Truth is, the earlier you take care of it, the less you'll have to save later on. It's not about living in the future, it's about taking care of it now so it's off your back. That way, you can get back to enjoying life today.
Penfold can help. We offer a flexible, easy to use pension you can manage online or on your phone. Start saving in minutes and top up, change, or pause your payments at any time. Keep more of what you earn by saving the money you would've paid in tax.
Get the future taken care of with the pension designed for the self-employed You can learn more about the benefits of a Penfold pension here.