How Do I Become a Freelancer?

Most people nowadays have thought about either starting a side hustle or turning their creative hobby into a business. It’s perfect if you want flexibility and financial freedom, or to earn some extra cash.

One of the routes you might choose to go down is freelancing. This is where self-employed individuals work independently for set clients and earn money on a per-job basis. You can freelance full time, part time or alongside regular employment – there are no rules! But where do you even begin?

Becoming a freelancer and earning money outside of employment for the first time can be daunting. We’ll discuss your first steps, and other things to consider.

What’s the difference between a freelancer, sole trader and being self-employed?

You’ll often hear the terms freelancer, sole trader and self-employed used interchangeably. This can become confusing because they don’t always means the same thing!

For example, a sole trader is a type of legal business structure, whereas being self-employed simply means you work for yourself (which you can do as a sole trader, a limited company, or something else entirely).

The term ‘freelancer’ describes the way someone works with their clients on an ad-hoc basis. It usually involves short-term projects, or working on an ad-hoc basis, rather than having contracts for a set period of time.

Like the term self-employment, being freelance isn’t a structure so you might register and pay tax as a sole trader or something else.

What kind of freelancer can I be?

Freelancers typically take on more creative roles – but anyone who deals with a set of clients on an ad hoc basis (and sets their own rates for every project or job) can call themselves a freelancer. Common examples often include:

You don’t necessarily need to stay in one place to offer your services, so you might even decide to freelance abroad!

What are the first steps to becoming a freelancer?

There’s lots to consider when starting a freelance business. While some people make it look easy (don’t believe everything you see on social media) it may take a while to make a profit. Proper planning and preparation usually means your business has a better chance of taking off – especially if you set clear achievable goals.

Find your niche

Choosing a niche which aligns with your skills is crucial. Your freelancing niche doesn’t have to be super specific, but having one can help you discover your target market and become an authoritative figure in that field – attracting future clients.

For example, you could be a freelance writer, or you could be an SEO content writer working with small businesses which need content to help improve their ranking in Google search.

Make a business plan

While some people can wing it successfully, it’s not something we’d recommend if you plan on running your business long-term. Writing a robust business plan can help you:

Marketing

While it would be nice to pluck clients out of thin air, it isn’t possible. This means you need to think about how you’ll market your business, such as by creating a website, using social media, or attending networking events.

Every business is different, so whilst a freelance dog walker may find it useful to advertise their business on Facebook, a freelance digital marketer might prefer to invest in their SEO and create a good portfolio website.

Once you know what type of freelancer you’re going to be, you can research your customer persona and target your primary audience. That’s marketing-speak for turning up in the right place at the right time.

Think about your costs

Every business needs to spend money at some point, even before they launch. For example, will you need to purchase equipment like laptops or printers? Will you need to rent out office space for meetings? Everything adds up, so it’s also important to keep track of any allowable expenses used “wholly and exclusively” by the business so you can claim tax relief for them!

Decide on your rate

Deciding a rate to charge can be daunting, and you may feel obliged to make your prices super-cheap to get more clients. Being too cheap can be just as off-putting!

Think about the skills you have, the time it takes you to provide work, and any materials or supplies you’ll need to complete the job. Don’t be afraid to set a higher rate if necessary!

What taxes will I pay as a freelancer?

The type and amount of tax you’ll pay on your freelance profits depends on how you structure your business. For most freelancers this involves registering as a sole trader because it’s free and simple to do.

As a sole trader there isn’t any legal differentiation between the business and you as an individual, so you can simply keep any profits that you make. You’ll need to report these profits and pay tax on them by submitting Self Assessment tax returns.

Some freelancers prefer to operate as a limited company because this type of business is a separate legal entity in its own right. It means that any debts belong to the business, rather than to you as the owner, which can be useful if you plan to work in a particularly high-risk industry, but this also means the company owns any profits too – so you’ll need to think about how you pay yourself from the business.

Your reporting responsibilities can be more complicated in a limited company too, for example:

Bookkeeping as a freelancer

Bookkeeping is the process of recording the transactions in your business in a consistent way. It may seem like a lot of effort, but like any business, bookkeeping is essential for freelancers. Your accounting records form the basis of every tax return you need to submit, so it’s important they’re accurate and up to date.

They can be useful in other ways too.

For example, if you an invoice a client and record this in your bookkeeping, you’ll be able to keep track of whether or not they’ve paid. Which means you’ll know when it’s time to follow up if they haven’t.

Good record keeping also means you have a better chance of staying on top of all your expenses – ready to claim tax relief when the time comes!

Learn more about using Pandle to make business accounting easier. Create an account today and decide what to do with all the extra time you get back.