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A FREELANCER'S GUIDE TO TAKING CONTROL OF YOUR FINANCES

From navigating tax and chasing invoices, there's a lot that goes into self-employment. But is it worth it? Definitely.

02.03.2021

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This time last year, I was working full-time as a features writer at a national newspaper, heading into the office every day. But in March, everything changed. Like nearly every other person in the UK, my career was upended by the pandemic and, after a few weeks of working from home, I was furloughed. Months of job uncertainty followed and, in September, I decided that if any time was right to take a risk, it was now. I wasn’t sure if my job would still be there in a few months and I’d always toyed with the idea of going freelance (having control over my own work, hours and office space had always felt very enticing).

Now that I’ve joined the WFH-gang permanently, I can confirm that what initially seemed tempting about going freelance has turned out to be true: I do have much more control over my own time, what work I take on and where I do it (at the moment it’s a choice between the living room and the kitchen, but you get my drift). There are, however, obvious drawbacks to self-employed life, from uncertain cash flow to no set holidays or benefits. So, if you’re thinking of taking the leap I did last year – or have been forced to by the pandemic – here’s how I make it work.

GET ON TOP OF PRACTICALITIES

The most obvious downside of going freelance is that you won’t have the safety net of a regular salary, healthcare or paid holidays. Be warned: you will spend so much time chasing invoices, you’ll wonder if you shouldn’t start charging for that, too. Set aside one day a week (Monday works well) to follow up on payments and keep a spreadsheet of everything you have coming in and out, with dates and as much detail as you can. Join a few newsletters and online chat networks for freelancers in your industry; not only will they give you some company and camaraderie, they're usually excellent resources for spreadsheet templates and other useful documents. Keep invoices (and remittance slips, if you get them from your clients) meticulously filed both digitally and in hard copy.

And finally, always remember that the life of a freelancer is feast or famine. Payments will come in spasmodically but sadly, direct debits are alarmingly regular – so if you earn tonnes one month, be sensible and save some for a time when things are tough. Don’t forget about your pension, either: like everyone else, you're entitled to the State Pension which is based on your National Insurance record, but when you can, you should start thinking about putting some of your earnings aside. If you're in the UK, check out yourpension.gov.uk for all the advice you'll need.

DON’T BE SCARED OF HMRC (AND SEEK SUPPORT IF YOU NEED IT)

The big thing that turns people off going freelance is that three letter word: tax. But there's really no reason to be alarmed. Before you do anything else, register yourself as self-employed, check out the HMRC website or call the newly self-employed helpline on 0300 200 3504. You’ll have to pay tax on your profits (what’s left after expenses have been deducted from your earnings). Keep a list (in your invoices spreadsheet makes sense) of all your expenses (don’t forget to save receipts!). Expenses can include everything from office space to consumables and travel, so it’s well worth researching what you can charge for. You’ll need to keep your receipts and records for six years and grapple with an annual self-assessment tax form (but don’t worry – there are plenty of guides to how to do this online). You’ll also need to pay national insurance contributions and, if you earn more than £81,000 a year, register to pay VAT. You may also want to think about opening a separate bank account. There are also tonnes of apps for budgeting and invoice management, from QuickBooks to Invoicely and Money Dashboard, so make use of them if that’s your thing. Of course, if all this sounds truly nightmarish, you can find yourself a good accountant to do it all for you – but you’ll still have to keep all your invoices and receipts, so don’t neglect that spreadsheet.

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PREPARE, PREPARE AND PREPARE SOME MORE

No one can promise that there won’t be surprises around the corner – loyal clients who suddenly drop you, cancelled projects and broken laptops that mean you can’t work for a week are all par for the course. But it is possible to make the transition smoother by looking ahead. Tentatively sound out a few clients before making the leap, set up (or revamp) your website and order some new business cards. Tell your contacts what you’re doing and pass on your new email address. Will you use your personal one, or set up a dedicated work email? Once you’ve made the transition to self-employed, announce it on social media, update your LinkedIn and – when restrictions allow – get yourself to networking events. It sounds really obvious, but always Google going freelance in your industry and see what specific advice there is.

FINALLY - REMEMBER EMOTIONAL WELLBEING IS JUST AS IMPORTANT AS FINANCIAL

While you may have gone freelance to break out of the set 9-to-5, you’re still going to need a routine (trust me on this). If you’ve been WFH during the pandemic, you’ll know that nothing much gets done when you’re in your pyjamas. A tried-and-tested hack for freelancers who are feeling uninspired is to get properly dressed and sit down at a desk wearing actual shoes (no slippers).

Which brings us to the desk itself: sorry, but there’s no way you can really be self-employed without one. It doesn’t have to be huge or fancy – mine is a small IKEA number tucked in the corner of a bedroom, between a wardrobe and a window – but it does need to be distinct from where you eat and relax. And get yourself a proper desk chair to save yourself thousands of pounds at the chiropractor. Not only are these essential buys for your physical health, they’ll make you feel like you’re seriously investing in your career move. And don’t forget, these are purchases you can expense.

Whether work is thick or thin on the ground, it helps to have set days or times when you do things – whether that’s billing clients or taking your lunch break. Don’t, however, be nudged into a routine you don’t enjoy because that’s what everyone else is doing. Isn’t that why you went freelance in the first place? If you work well late at night, ignore those who say you should be getting up at 7am. The beauty of being self-employed is that this kind of thing is up to you.

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