Public liability insurance

Thinking about going freelance?
Here are some things you might need to consider

Taking the plunge into the freelance world is not an easy decision. And it's certainly not for everyone. You might free yourself from the constraints of employment and revel in being your own boss, but at the same time your safety net of a regular income disappears too. Something that's an even bigger consideration in the current economic climate.

This article explores things you might want to think about before becoming a freelancer. We also chatted to David Rose, a freelance creative copywriter since October 2018, to get his thoughts on freelance life, and how the pandemic has changed things for him.

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A quick look at the UK freelance market

There are currently over two million active freelancers in the UK1, who contribute £125 billion to the UK economy1. For the vast majority, 1.77 million1, working on a freelance basis is their main source of income, but for others it's a secondary or part-time position to earn extra money or gain more experience.

There are many different sectors you can freelance in, these are some of the more popular ones in the UK:

Business support
Writing and translation
Sales and marketing
Video, photo and audio
Website development
Software development and mobile
Social media
0% Most popular freelance sectors in the UK by % 22%

Understandably, as markets, economies and technologies change, the demand for freelancers in certain areas increases and decreases too. Micro Biz Mag did some keyword research in 2020 to discover how many searches are made each month for a variety of freelance skills.

Search Terms and their average number of monthly searches (UK)

Freelance Graphic Designer 2,400
Freelance Web Designer 2,000
Freelance Web Developer 1,700
Freelance Writing 1,700
Freelance Photographer 1,500
Freelance Copywriter 1,400
Freelance Designer 1,000
Freelance Accountant 870
Freelance SEO 700
Freelance Marketing 660
Freelance Translator 520
Freelance Social Media Manager 470
PPC Consultant 390
PPC Freelancer 270
Freelance SEO Consultant 260
Freelance SEO Expert 250

The advancements in technology, such as increased internet speeds, video conferencing, file sharing services etc. make it easier to work as a freelancer. Especially in the digital sectors, as shown in the above table, where homeworking isn't a problem at all. The ability to do homework also makes freelancing an attractive option to parents. They can juggle looking after their little ones with earning money, while saving on expensive childcare costs.

The rise of the self-employed

Research from the Office for National Statistics (ONS) shows the number of self-employed people (not just freelancers) in the UK has risen over the last two decades. It increased from 3.3 million people (12.0% of the labour force) in 2001 to 4.8 million (15.1% of the labour force) in 2017.

There were two age groups in particular that had fast growth – the over 65s and 16–24-year-olds. Although the 45–54 age group still had the largest number of self-employed people.

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What's the difference between freelance and self-employed?

In a nutshell, not a lot. If you're a freelancer you're technically self-employed, especially when it comes to filling out official documents such as tax returns.

Freelancers do work alone, whereas some self-employed people may employ other people in their business. But it's more defined by the type of industry you work in. For example, if you're a copywriter, you'd probably class yourself as a 'freelancer', whereas if you're a carpenter working for yourself, you're more likely to call yourself 'self-employed'.

The benefits of going freelance

If you're currently employed, you might be considering going freelance because you've seen other freelancers enjoying the perks of being their own boss and working the hours they want. Here we take a look at these benefits, and a few others.

Work the hours you want

You're no longer constrained by the regular 9–5, you can choose what hours you work.

That might be 10 or 60 hours a week, it just depends how many you need to achieve your income target. Some freelancers are happy to do their bare minimum, while others push themselves to work all the hours they can.

Whichever camp you fit into – the choice is still all yours.

Enjoy more freedom

This flexibility around the hours you work and where you work give you greater freedom, especially if you can work from home. As with any job, you'll have deadlines, but it's up to you how you hit them.

If that means getting up at dawn, doing a couple of hours, then stopping to sort the kids out for school – no problem. Or maybe you've got a week's work but fancy meeting friends for a few drinks on Friday afternoon? You can simply work late Thursday or get up early to finish the job.

Pick the jobs you want

When you work for yourself, you can choose the clients you want to work for, nobody can force you. Although if things are quiet, you can't afford to be too fussy.

Plenty of variety

Having several clients often leads to a wide range of projects to work on, which keeps things interesting. You'll also get the opportunity to visit different client premises (this will inevitably be limited during the COVID-19 pandemic) and meet new people (probably over Zoom currently), further adding to the variety.

You're the boss

While you may report into clients as you work on projects, overall you make most of the decisions yourself.

No longer being told what to do and what to work on can be hugely satisfying.

It can be very profitable

Freelancer day rates and project fees tend to be higher than if you were a full-time employee in the same position. This is because you have fewer other benefits available to you, such as being paid if you're ill or on holiday, and to cover periods when there's no work coming in.

You're also in more control of how successful you are – the more work you put in, the more you get out. And, compared to a salaried job, you're less likely to mind working late when you know you're getting paid for it.

A few considerations before quitting employment

We've just discussed the many benefits of being freelance, but before you start typing your resignation letter to your current employer, remember it's not for everybody. Here are a few things you might want to consider:

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Do you need a steady income?

Most people have rent or a mortgage to pay, as well as the usual household bills. Obviously when you are employed you know how much you're going to be bringing home each week/month to cover these expenses. When you're a freelancer that's less certain.

There are often peaks and troughs, some months you can be crazy busy, others you're refreshing your emails every five minutes waiting for the next job to land. This inevitable creates income variations, which all being well, even out in the year to give you what you need (and hopefully a bit more).

The 'uncertainty' is something freelance creative copywriter David Rose mentioned to us, especially this year: "In these unprecedented times, one of the biggest challenges freelancers face is the uncertainty about when jobs will come in. Businesses have become more reactive than proactive, which makes things less predictable. There's always an element of this for any freelancer, but 2020 has heightened it further."

'Money' is often the deciding factor on whether or not to go freelance. Do you have some savings? This might give you the confidence to take the leap as you know there's back-up money there as you build your business and for quiet spells. Does your partner have a good income? They might be able to help cover most of your outgoings until things are up and running?

Do you need to always be around people?

As a freelancer, it's just you. Although, depending on your sector, you will often have face-to-face meetings and projects in a client's workplace where you can interact with others. But it's still not the same as having colleagues you work with on a daily basis and who you nip out for a sandwich with to catch-up on the latest office gossip.

You're more likely to work from home too as a freelancer. Especially since lockdown. Meaning even less regular contact with people, which suits some, but not others.

Are you self-motivated?

Being your own boss can be great. But if you're the type of person that has to always be told what to do, you might want to avoid freelancing.

You have to be disciplined and manage your time effectively so that you hit your deadlines and keep your clients happy. Stopping for five at home is fine but stopping to watch eight episodes of a box set in the middle of the day when you have a 5.30pm deadline isn't.

Do you know when to stop?

If the work is rolling in, it can be difficult to force yourself to take time off. As days off equal a loss of income. Even during the days you're working, consider taking breaks otherwise your projects can suffer, which will affect your business. Try to schedule time off and routine breaks to avoid any burnout.

Finding clients and projects as a freelancer

Finding clients at the start can be a bit of a challenge. Fortunately, word of mouth is one of the most common ways to attract new clients, so once you've got a couple of solid jobs under your belt, you should find it becomes a lot easier. Until that happens, here are a couple of things you could consider to bring in some work as a freelancer:

  • Attend networking events.
    Get out there and chat to people – not as easy in 2020 granted.
  • Register on freelance job boards.
    Businesses often post freelance projects on websites. If you do get jobs through these, ask people to leave a review as this will increase your chances of securing more work on them.
  • Embrace social media.
    LinkedIn is a particularly great platform for promoting yourself and finding jobs.
  • Make your website more visible.
    Getting your website further up the Google rankings and making it easier to find will help. You could increase traffic to your website by creating useful content and introducing keywords (naturally).
  • Nail your pitch.
    Whenever you get the chance to promote yourself to a potential new client, in an email, in person or over the phone, always have a fine-tuned sales pitch ready and adapt it to suit each client's needs.

What professional soft skills should freelancers possess?

Your success as a freelancer very much depends on you as a person – your personality traits and approach to work. Yes, you have to deliver great work too, but how you behave and interact with clients is equally as important – below are a couple of soft skills you might want to consider developing:

  • Be a good communicator.
    Write and speak concisely and clearly, and always double-check everyone is on the same page when it comes to deliverables, time and budget.
  • Be positive.
    Keep an open mind and your chin up, no matter how things are working out on a project.
  • Be punctual.
    Avoid being late for meetings and always deliver your projects on time.
  • Be organised.
    Record meetings and work in a diary to avoid double-booking yourself and letting people down. Try to keep good financial records to reduce accountancy fees and the risk of any fines from HMRC.
  • Be flexible.
    Things change constantly in business – deadlines move and budgets get amended. Accept them and work with your clients to help them achieve their goals.
  • Be broad-shouldered. Criticism. Nobody likes it, but at some point, no matter how good you are, you'll receive it. If you have a rationale for doing what you did, maybe present it in a constructive way, but don't respond negatively. Sometimes you just have to take it on the chin.

Developing your brand as a freelancer

Creating a look-and-feel for yourself, as well as a tone of voice, can help attract new clients by making you more memorable. As with any branding though, always present it consistently, don't change it every few weeks because you're bored.

Depending on your skillset and contacts will determine how far you go with your branding. It might be as simple as choosing a basic colour palette and adding a touch of humour to your writing. You could go further still by creating a logo, icons, graphics and an image library. Anything you can do to make yourself more distinctive and professional will help.

How has coronavirus affected freelancers?

Coronavirus has affected everybody, there's no escaping it, and the freelance market is very much reflective of the current business landscape. Some are struggling, others are getting by, then there are those who are doing good.

As we know, certain sectors such as hospitality, tourism, high-street retail and the arts, have been hit harder, which inevitably has a ripple effect on freelancers who work in them too. It doesn't matter if you're an experienced freelancer, with a huge client base, if you operate in certain industries, you'll notice it more. Research commissioned by the PR Cavalry showed half of PR freelancers have lost over 60% of their income and two thirds don't qualify for government support. At present freelancers can check if they qualify for any of the below government help schemes.

Each link will take you to the site:

Self-employment income support scheme

Find out more

Bounce back loan

Find out more

Job retention scheme

Find out more

Business interruption loan scheme

Find out more

Business support

Find out more

It's not all doom and gloom though, and it's a cliché, but out of adversity comes opportunity. As a result of the pandemic, businesses are less likely to be hiring new full-time employees, choosing instead to use freelancers on a project-by-project basis when they have demand.

We asked David to tell us about the positive and negative effects of coronavirus on his freelance creative copywriting business: "It's hard to find any positives out of all of this. If pushed, I'd say embracing new technology, like video conferencing and shared work boards. Well, this tech isn't 'new', but it's certainly become mainstream now.

"I'm not going to go into any detail on the negatives. My income is certainly down on last year, but I'm healthy and I still have a business, for that I'm grateful. Others have been affected far worse than me, and not just financially."

David went on to tell us that many freelancers were already geared up to working from home, so the lockdown had little impact on that side of things, but it has minimised the opportunity for client interactions: "No longer having face-to-face meetings with clients and being able to work in their offices makes it more difficult to maintain strong relationships with them. This doesn't mean it's not achievable – you just need to keep being as helpful and accommodating as possible and deliver great work."

What coronavirus government help is there for the self-employed and freelancers?

There is support out there for freelancers, what you're entitled to very much depends on how you set up your business at the start – as a sole trader or as a limited company. You can find out more on the UK government's Business Support page.

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Setting up your business: consider a sole trader or a limited company

If you become a freelancer, you basically have two options as to how you legally form your business: a sole trader or a limited company. There are advantages and disadvantages of both, which we touch on here, but it's always best to get professional advice before deciding on the route to take. Something David totally agrees with:

"I employed an accountant right at the start. Another freelancer recommended I do it – and what a great bit of advice it was. They helped me set up the business from a legal/financial point of view after running through the pros and cons of being a sole trader and a limited company. They also continued to look after the money side of things for me, together with my wife who does the day-to-day bookkeeping. I might be good with words, but I'm terrible with numbers."

Setting up your business

What is a sole trader?

A self-employed person who is the sole owner of their business. It's the simplest business structure around, making it one of the most popular.

What are the advantages of being a sole trader?

It's easy to set up and there's relatively little paperwork, other than an annual self-assessment tax return. You'll also have greater privacy than other registered businesses, as your details are not on Companies House.

What are the disadvantages of a sole trader?

The main drawback of being a sole trader is that you, the individual, have unlimited liability as you're not viewed as a separate entity to the business. This means you're personally liable if the business gets into debt and you could lose personal assets. The tax rates also tend to be higher compared to those of a limited company.

What is a limited company?

A business structure with its own legal identity. One that's separate from its owners, shareholders and directors.

What are the advantages of a limited company?

You have limited liability as there's a clear legal distinction between the business owner and the business itself. So, if things go wrong, you'll only lose what you put into the company, rather than your personal assets.

Limited companies also tend to be more tax efficient than sole traders, as rather than paying income tax they pay corporation tax on their profits. Plus, there's a wider range of allowances and tax-deductible costs that you can claim against your profit.

What are the disadvantages of a limited company?

The legal and financial side of things are more complicated, such as the need to outline your Director's Fiduciary Responsibilities. You also have to file an annual return and annual accounts. With these added tasks, it can be more cost effective to hire an accountant, especially as they say a good one will more than pay for themselves.

Sorting out your tax as a freelancer

If you're employed, your employer usually takes care of paying your taxes through the Pay As You Earn (PAYE) system. As a freelancer, you're responsible for paying your own taxes. Some freelancers do this themselves, while others like David, choose to use the services of an accountant.

Depending how you set up your freelance business, sole trader or limited company, will determine what tax records/information you need to keep and submit to HMRC. Either way, keeping good financial records will make this job much easier, so you might want to consider carefully filing your receipts, invoices, bank statements and bills.

Sole trader and tax requirements

If you go freelance as a sole trader you need to register for and file a self-assessment tax return. This assessment calculates how much tax and National Insurance you owe based on your income and expenses and must be completed every year.

Limited company and tax requirements

As previously mentioned, a limited company's finances are a bit more complicated. First you have to register on Companies House and inform HMRC that you're operating as a limited company. As you are technically an employee of the business, you also have to set up and register a PAYE scheme.

You need to complete a company tax return at the end of the accounting year, which will show the company's taxable profits and if you have to pay any corporation tax. As a director of a limited company, you must also submit a personal self-assessment tax return.

Types of insurance freelancers might need

If you do become a freelancer, you might want to consider taking out freelancer insurance. Accidents happen, and no matter how wonderful you are at what you do, we all make mistakes. Having insurance in place from the start could help protect your reputation and livelihood should the worst happen.

There are several types of insurance you might want to consider, including ones that are tailored to your particular profession such as Photographers Insurance and Web Designers & App Developers Insurance. But two of the common insurances used by freelancers are professional indemnity insurance and public liability insurance.

Public Liability Insurance for freelancers

This covers the compensation costs and legal fees you are required to pay if someone is harmed, or their property is damaged, because of your business activities.

Even a quick meeting in a coffee shop holds liability risks. If you're a freelance journalist for example, and you knock hot chocolate over your interviewee's laptop, you could be liable for the cost of replacing it and their loss of income while they're waiting for it to be repaired/replaced.

Professional Indemnity Insurance for freelancers

Professional Indemnity Insurance covers you if a client claims your advice, work, ideas or designs harmed their company or caused them a financial loss.

Maybe you're an accountant and you accidently emailed confidential financial records to the wrong client, you'd be liable to a claim. You can find out more about this type of insurance in our guide to professional indemnity insurance for freelancers and the self-employed.

How you could minimise the risks of a claim against you

Taking out Public Liability Insurance and Professional Indemnity Insurance will give you the reassurance you're covered, should somebody make a claim against you. But here are a few simple pre-emptive steps you could take to reduce the chances of this happening in the first place:

  • Make sure your client's expectations are clear and agreed in a contract (where possible).
  • Be honest about what can be achieved and break things down into set deliverables.
  • Record all contracts and sign-offs in writing and log them securely.
  • Keep your work area tidy and complete risk assessments if you can.
  • Keep clients and the public well away from dangerous areas you're working in.

A few more freelance tips for consideration

Create yourself a workspace at home

A dedicated workspace is important for any freelancer working from home. It will help you to be more productive, as there are less distractions from what's going on elsewhere in your home, such as your partner watching your favourite TV show or the cat swinging from the lounge curtains.

Having a separate workspace also allows you to set it up exactly how you'd like it to be, so you're more comfortable if you're spending long hours in front of a screen. And you'll create a better work/life balance, as you'll find it easier to separate the two.

Get into a routine

If you're working from home, it's important to define your 'standard' working day. It makes it simpler for your clients to know when they can get in touch with you and helps give you some structure. So set your alarm, get dressed and hit the ground running as if you were going into work normally, and aim to finish at a similar time every day – so you switch off too. Inevitably with some jobs you'll be burning the midnight oil, but at least you'll be earning money for yourself.

Is freelance right for you?

Freelancing isn't for everyone and you should strongly consider your own personal circumstances before making a decision.

We asked David for his final thoughts on going freelance: "It was a big decision, but it worked out for me. Even with the impact of coronavirus, which has affected my income, I wouldn't change it. In fairness, ask any freelancer do they regret taking the leap, and very few will say 'yes'. Well, maybe a couple more might this year."