Deciding to work as a freelancer can initially seem quite daunting, you have much more responsibility than a permanent employee and this can put a lot of pressure on a person. However, the benefits far outweigh any negatives and with the help and advice of professionals to guide you, such as freelancer accountants, it will be the best decision you ever make!
Some of the many benefits of freelancing include:
• You can set your own rates, which may include being paid for every hour that you work. Also, as a freelancer, you have the opportunity to work over time if you so choose.
• An average freelancer rate can easily be double that of a full time employee – sometimes even more.
• You are able to claim all of your business expenses against your income to further reduce your tax bill.
• Being able to choose when you work, where and for however long you like. This is when, as a freelancer, you do need to make sure you have the motivation to keep your business going – if you don’t work, you won’t get paid…
How to start freelancing
Here are a few key steps that will be useful for when youfirst begin working for yourself:
Find a contract
As a freelancer, you will need to actively seek out your own work. News feeds from specialist contractor websites are a great way of finding out where you are likely to find all the current jobs; but first you must make sure that your CV is up-to-date, well written and presented.
Other tips for finding work:
• Use jobsites – post your CV on as many jobsites as possible, focusing on more niche sites so you know that the right person will be viewing it.
• Social media – LinkedIn is a great way of getting your name out there and there’s also the opportunity to share free advice and be made aware of any job roles coming up.
• Contacts – Building up a portfolio of contacts that you have met along the way is a great idea; this is especially useful if they can perhaps offer you a role in your chosen field. Don’t be afraid to contact them directly and send them your CV.
Decide whether to trade through an umbrella or limited company
By trading through an umbrella company, you can expect to take home around 60%-65% of your contract value.
Forming your own limited company is usually the best option as it is the most tax efficient method of working and can see you taking home around 75%-80%.
However, there is usuallyone in particular that will suit you and your needs best, for example, working through an umbrella company is generally the best option for shorter term or lower value contracts.
Set up a separate bank account
If you form your own limited company, it’s important that you remember that your business is seen as being a completely separate entity to you, the company director and shareholder, therefore all finances must be handled through a different bank account to your personal one.
Register for VAT
Being VAT registered means you can reclaim VAT on purchases you have been charged VAT on.
It usually works out in your best interest to set up on the Flat Rate VAT Scheme – this is because you will charge standard VAT (20% in 2011) on all invoices, but pay back HM Revenue & Customs at a lower percentage depending on your trade. This will save you some extra money.
Appoint a contractor accountant
You can get great limited company accountancy advice from an accountant who specialises in working with contractors; it’s always best to take on an accountant that knows specifically about contractor tax, so that they will be able to offer you the best advice that will suit you and your working practices.