Starting up as a freelancer is a big step.  You may be leaving the security of employment, a regular salary, holidays, sick pay and possibly even a company car.

The advantages or working freelance include being able to control your work, being more flexible regarding hours and usually a higher net rate of return.   Many large organisations that need skills rather than continuity of staff are happier to take on contractors when needed. This is a large and growing market particularly in the IT and consultancy sectors and also in almost every service and profession.  If you are interested in discussing your intentions of becoming a freelancer please email or call us.

The accounting, tax and regulatory requirements can be onerous, however if you appoint Green Accountancy you will have the administrative workload taken care of.  All you need provide us with is a simple spreadsheet of transactions, your bank statements and any letters from HM Revenue and Customs or Companies House.

We recommend that you create a simple business plan.  This may be as short as one page in Word.  The plan should cover your sector, likely customers, skills and experience and any marketing activities you are planning to undertake.  You should also consider at the outset the likely financial budget of your freelance work.  Again this may be simple, consisting of a regular estimated monthly income and expenses.  We will be happy to help and provide examples.

The next step will be to decide whether you will be operating through a limited company or as self employed (sole trader or partnership).  Contractors operating through agencies are almost always required by the agency to use a limited company.  The main differences are that a limited company means your personal assets are not at stake in the business; a limited company has a perception of being larger; your tax may be less in a limited company (depending on circumstances); accountancy fees are more for a limited company. 

If you operate as self employed you must consider whether you could be held to in fact be employed.  If operating as a limited company, you must consider whether IR35 applies.  The tests for employment and IR35 are similar, although the consequences are very different.

If you choose to trade through a limited company the next step will be a company formation.  We can form a company for you (fixed fee £95+VAT).  Your limited company place of registration, number and registered office must be on all company letters, forms, emails and websites.

The next steps will be to open a business bank account and deal with any necessary office set up administration.  This may include stationery, telephone lines, email addresses, professional registrations and data protection act notification.  Registration with HM Revenue and Customs must be dealt with promptly otherwise penalties may be applied.  VAT registration must also be considered and will be mandatory if your turnover exceeds the registration threshold.  Many contractors benefit from using the VAT flat rate scheme.

You will need to record all of your business transactions.  This may be done either using a spreadsheet system such as one of our free downloads or one of the popular accounting software systems such as Sage Instant. 

Further information on company formations, registering, bank accounts and accounting software is available using the menu in the left panel.  Please feel free to contact us with any questions regarding becoming a freelancer, and good luck with your future plans.