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Freelancers can sometimes seem like a mythical beast to those working in full-time employment. From afar, they look great; they get to wear what they want, work from home and pick their own hours. On closer inspection, though, life isn’t always quite so leisurely, and it’s certainly not the carefree walk in the park many assume it to be.
In this guide, we’ll cover the basics of freelancing, including how to become one, the common pitfalls and examples of great freelance careers.
So, what is a freelancer?
Essentially, it’s someone who works for themselves. This means they don’t have your usual, run-of-the-mill employment contract with a company (although there are plenty of people who do freelance work in their spare time outside their normal job). This means a freelancer must go out and find work themselves. This can be done in a number of ways and, usually, an array of methods have to be employed. It can include networking events, word-of-mouth, job posting sites (see our article about the best-paying freelance job sites) and the tried-and-true CV-spraying. Often, freelancers won’t know when their next job will be coming in – half the battle is constantly searching for new work.
Do freelancers need to register with HMRC?
Freelancing is a general term for working for oneself. All freelancers should be registered with HMRC, regardless of the business setup.
Depending on your earnings, setup and other tax factors, you may prefer to act as a sole trader, while others may opt to become a limited company. Both come with their own pros, cons and challenges.
All jobs vary in size as well, so it’s pretty common for a freelancer to be working on a number of projects at once. This also means they can have several different clients at the same time. A freelancer, therefore, has to be well-organised. This means keeping tabs on various conversations, and deadlines and working in tandem. Without organisational skills, freelancers can really suffer.
How to make money as a freelancer
There are many points to consider to become a successful freelancer, from how you deal with your clients to managing your accounting. We’ve provided a breakdown of all the areas you’ll need to plan for to become the best creative freelancer on the market.
Find your niche
The type of freelance work you do will depend on your skills, talent and experience. You need to choose an industry that you are passionate about, as you’ve got to be motivated to compete with others. You don’t have to freelance in the industry you work in, although that’s a common move for those who want to step out on their own.
Freelancers are typically service providers, although running a small online shop, for example, could also be seen as “freelancing”.
Common types of freelance jobs include designer, illustrator, copywriter, software engineer, motion designer, photographer and videographer. However, that list is far from exhaustive.
You can browse our Member Stories to learn more about what it’s like to run your own business in a wide range of industries, including interior design, writing and WordPress web development.
There are many good reasons for going freelance: to be your own boss, to do something you really love, to ditch the commute and spend more time with your family, or simply to have greater flexibility in your life.
Slowly reducing your hours while you build up your freelance business is a great way to leave your job while minimising money worries. Every employee has the right to request more flexible working hours for any reason, although it’s worth checking if your employment contract allows you to freelance on the side, especially if your role is in the same industry as your chosen side hustle.
You’ll need to push yourself out of your comfort zone to get new clients, so whether you hate speaking on the telephone, networking, or dressing up smart for a pitch, you’ll have to keep making yourself plug away at your business because you’re the single driving force that keeps it all going.
Create an online portfolio
Depending on your work, an online portfolio is a great way to share your projects and attract potential clients' attention.
You can either build your own website, or opt for a third-party platform to host your portfolio. The latter tend to be specific to your industry, popular options include:
For writers: Copyfolio, Clippings.me
For designers: Adobe Portfolio, Dribbble
Be aware of NDAs and other agreements that may restrict the sharing of client information.
Plan, plan, plan!
There’s a reason why people say failing to prepare is preparing to fail. If you are transitioning from employment to freelancing, then you might experience a culture shock when the project management all falls to you.
If planning and project management aren’t your strengths, then don’t worry. There are plenty of tools on the market to help freelancers structure their businesses, covering everything from task management to CRM.
Here are some of the top freelancer tools for better planning:
- Notion - Flexible AI-driven platform ideal for creative freelancers who want to see their projects, clients and other information from different views.
- Trello - A simple pinboard-style app for managing projects and tasks
- Todoist - Your typical todo list but with extra functionality like recurring tasks, priority flaggings and tags.
- Asana - Popular work management tool favoured by larger companies, but still very freelancer-friendly.
Invest in hardware
When you first go freelance, there will be significant upfront costs. Even service-based businesses have necessary initial purchases, such as laptops, printers and phones. Remember, when you buy equipment for your freelance business, you will need to keep the receipts and ensure all transactions are correctly allocated in your accounting software.
CrunchOne allows you to attach receipts to your records from your phone, so you can keep everything organised and ensure your tax bill is accurate.
Secure funding
If you require a financial boost for those initial investments, here are some funding options to explore:
Start-Up Loans
You could be eligible for a loan of up to £25,000 from Start-Up Loans, a government funded scheme which also offers mentoring and business advice. You can also look into business loans from high-street banks and building societies, challenger banks, independent lenders, and smaller specialists.
Collaboration
Look for any local creatives you could build a business with and work collaboratively alongside. Put out some messages on Gumtree or local job boards or speak to people you know.
Crowdfunding
Once your business is up and running and you’re looking for extra investment, asking the public for help is becoming increasingly commonplace. Use a website like Crowdfunder or Indiegogo to offer perks with varied value depending on how much each backer donates.
Calculating a day rate
Working out a sensible and competitive rate to charge for a day’s work can be tricky, particularly in a saturated market. Ask yourself how you want to appear to your potential clients. Of course, you don’t want to overcharge, but pricing yourself too low could mean you’ll need to work longer hours to achieve your goals.
Number crunching
In essence, the freelancer runs their own business, which brings a lot of extra work with it: administration, accounts, marketing, contracts, invoices and all the other stuff that your average worker doesn’t have to juggle alongside their actual job.
To avoid making such a mistake, you could simply add 20% on top of your desired salary for tax, a sensible sum for expenses and holidays and divide the total by your working days - giving you a more realistic day rate. Don’t forget to allow for building up some savings or a pension pot too if you’re a good forward-thinker.
Add another 10% to this rate when you give a quote. If you need to negotiate, taking this off will still leave you with the rate you’re looking for. Unless the job is a valuable gig for your portfolio, don’t do yourself a disservice by accepting any work for less than your day rate. Alternatively, it might suit you better to charge per project rather than per hour.
How to increase your day rate
As a freelancer, there’s obviously no boss or HR department to make the judgement for you - so you have to be the one to make the call if you want a pay rise. See what your more upmarket competitors have to offer and where you differ - don’t risk losing out on pay because you’re too shy to up your rates.
Give your regular clients plenty of advance warning if you’re going to be charging more. Nobody likes an extra expense coming out of nowhere, and this will at least allow them to budget accordingly. However, if you’re asking for more money, you need to explain why you deserve it. Explain to them briefly what sets you apart from those charging less.
Finding clients
Got a fantastic business idea in place, but not sure where to start with generating leads? You’re not alone. Lead generation is a vital part of running a small business, but even seasoned self-employed professionals can find it difficult sometimes. Having a broad set of methods for getting in front of the right people (and knowing how to hook them in) will improve the cash flow and public image of your business, and – just as importantly – your own morale.
Here are some ways your small business can generate leads and bring in more money.
Advertising
Search engines (mainly Google Ads, but don’t discount Bing) and social media channels offer straightforward ways of paying to get your small business in front of people, as well as advanced options for those with an expert on hand. These are often referred to as ‘Pay Per Click’ or PPC, and (if done right) are an incredibly targeted and effective way to get visitors onto your website or online store. Depending on what you’re selling, you also might want to consider traditional advertising. Local directories and newspapers are always looking to fill ad space, and might offer you a tasty discount for late space if you build a decent relationship with their sales reps.
Ask your friends for help
Phone, email, and text your family and close mates explaining you have this exciting new business venture, and that you’d really appreciate it if they could help you out. Even if they personally have no interest whatsoever, maybe they can tell their friends on social media, or might be able to hook you up with a friend who would love whatever service it is you’re selling.
Important note though, don’t confuse this with doing a big generic mailout of all your contacts, otherwise, you may fall foul of the GDPR rules regarding recipients needing to opt into promotional material.
Blogging and newsletters
If promoted properly, creating interesting and informative content will keep potential leads coming back and increase their awareness of your company.Showing that you know what you’re talking about will improve your credibility, and documenting your own thoughts and experiences can add a more relatable, human element to the company.
Business cards
If you want to make sure you’re making a lasting impression when you meet a potential client or customer, get some high-quality business cards printed.
Calls to action on your website and social media
Although this isn’t a platform in itself, calls to action (CTAs) are such an important lead generation factor that they deserve their own section.
Partner with another company
If there’s another business out there you have a feeling your target audience might be interested in, the feeling could be mutual. If you suspect this is the case, make contact and see what sort of relationship you can foster. Read our article on choosing the right business partner for some more useful pointers.
Videos
YouTube is the second biggest search engine in the world behind Google (their parent company). Think about what you can do to build a YouTube presence and how you can then use this to generate leads and subscriptions.
Webinars/podcasts
A great way to showcase your knowledge and expertise is simply by talking to people for a substantial amount of time. Perhaps you can speak at a local or industry-specific conference, or host a seminar at a local function room. Recording and broadcasting interesting discussions and advice online can bring in subscribers, and mean that you have a base of people who are the first to know when you have a tempting offer or a new product available.
White papers
Got some unique insight into your industry? Slapping it into a blog is fine, but if it’s really valuable stuff and you’re keen to generate leads, you might consider creating a sleek looking PDF version and asking for the reader’s email address before they can access it. Of course, you’ll need to make sure the data you gather (and what you do with it) is in line with GDPR.
Word of mouth
Ask your best customers to talk you up to their friends, and give them a little extra service or special thanks for their good deed. Referral or affiliate schemes (like our Crunch referral scheme) or positive feedback on relevant review websites can often make or break a customer’s decision to engage with your business.
Working with international clients
One of the most attractive aspects of freelancing is that despite working from home, working online offers you many opportunities to land projects from clients across the globe. There are a few hurdles you need to be prepared to face, though. Different time zones seem obvious, but you’d be surprised how easy it is to assume your client is awake just because you are. Restrict yourself to emails where possible, and schedule calls and Skype only when necessary.
Different currencies
When charging a price for your work, consider currency exchanges and the acceptable rates in your client’s home nation.
Method of payment
If your client pays you via international bank transfer, remember to budget your finances to accommodate the standard 3-5 working day processing time and possible currency conversion costs. You should also consider getting paid upfront.
Cultural differences
Talk in plain English with non-native speakers to lower the risk of a communication breakdown. Follow up with an email that outlines what has been agreed upon, and always ensure that you have something in writing agreeing to the price and payment terms.
Make sure you understand the tax implications.
We’ve got an article with the answers you need if you’re contracting abroad or working for a foreign client.
How to make sure you get repeat business
Finding clients is one thing, but actually retaining them is another. There are a number of easy ways you can keep yourself “front of mind,” putting you in pole position should any more work come up.
Connect Follow your clients on Twitter, LinkedIn, Facebook, or wherever is appropriate. This way you can keep up with what their company is doing, and vice versa. You might even respond to them with the occasional comment or post to stay in touch.
Newsletters
Deliver a monthly or fortnightly email newsletter to interested parties, and consider asking new clients to your mailing list if they’re happy (GDPR).
Follow up
Once your project is complete, follow up with the client a few weeks later to ensure everything worked out well. Ask for their comments and feedback and suggest ways to grow the project in the future.
Frequent their website and socials
Keep up to date with what the company is up to. Subscribe to their blog, leave some comments or link to useful content.
Leave a business card
Get business cards that stand out from the rest so you’re remembered in the future.
Merchandise
Print flyers, make pins, and brand your pens to hand them out at meet-ups.
Stay on top of the paperwork
Invoice straight away and include all the information your client will need (itemised bill, payment details, reference etc.) so there’s no back-and-forth. Say thank you when they’ve paid - the little touches really can help.
We have a free invoicing tool for sole traders as part of your Crunch benefits, as well as free invoice templates. For the more forward-thinking freelancers, our fantastic online accounting software is all you need to keep on top of your business finances, along with support and advice from our superhero client managers and expert accountants.
Produce your amazing work
By far, the most effective method of generating repeat business is to be an amazing freelancer.
Dealing with difficult clients
Unreasonable clients are, unfortunately, something that all freelancers will encounter at some point. So how do you deal with unreasonable demands and bad behaviour from your client?
Unreasonable requests
If you’re a super savvy freelancer, you’ll have drawn up a contract between yourself and the client that clearly lays out the scope of the work. A contract is your security and offers protection from unreasonable client requests.
Need extra help putting a contract together? Check out our article “Protect yourself with these contract samples”.
A bombardment of questions
When you start a new relationship with a client, they’ll have some questions. But be sure to know if they’re asking relevant questions or expecting too much. How much you give clients for free is always a personal choice. State your position upfront.
Rudeness
Leave their request until you’ve had a chance to calm down and reflect. Of course, deadlines are important but it’s worth taking the time to respond in a manner that will strengthen your professional relationship rather than destroy it. If your client is truly abysmal to work with – get rid, life is too short! Think about the additional hours you spend working with a bad client. Not just in terms of answering emails, adapting or changing work – but the emotional time.
Dealing with late payments
Most businesses have been affected by late payments, but none are disadvantaged quite as directly as single-person creative businesses. A client can decide to withhold payment for a multitude of reasons: they’re unhappy with the finished work, they don’t have the money to pay you, or they’re just not nice people. Clients can be hard to win and easy to lose - but you must never be timid about getting paid for your work. Having fixed procedures in place will reinforce your professionalism, and might even increase your client’s trust in your service.
Invoice and chase letters
It’s unlikely the client is being slack just to spite you, so a polite reminder should always be the first course of action. Drop them a quick email and ask for a confirmation of receipt, so you know someone is dealing with it.
If a week goes by and still no payment, a firm reminder is appropriate. Pick up the phone and ask them again to confirm the invoice has been received. Keep notes of any calls or emails from the client regarding payment so you have a record of the broken promise to reference later on.
If another week of silence goes by and your requests fall on deaf ears, it’s time to show you’re really serious. From day 15 to day 30, you should make regular contact with the client by telephone to ascertain the reason for the delay. Tell your client that it is your policy not to produce any further work until this issue has been rectified. Whilst you may have built up a strong personal relationship with the client, you’re better off spending your time looking for clients who actually pay their freelancers. We’ve got an article all about chasing unpaid invoices as well as some free late payment reminder letter templates to help.
Getting a third party involved
If you’ve exhausted all reasonable routes to securing payment, enlisting an agent to assist in the recovery of funds will free up company time to concentrate on other clients. Always seek out recommendations from other freelancers or an accredited body before making any rash decisions which will potentially cost you customers and return business.
A good agency will have the experience and procedures in place to rapidly escalate your claim for payment and will be able to advise you on the best way to approach the recovery. Typically you won’t be expected to pay for the time spent in recovery as many agencies offer a no collection, no commission service.
Overall, the best practice is to simply ensure that good, clear communication and documentation are maintained from the outset of the work you undergo for a client. This means that if the client does give you the run-around, you know that you’ve done everything correctly from your end – and that you can prove it.
Claim all your expenses
As a self-employed worker, tax relief can usually be claimed on anything that’s necessary and essential for your duties. This covers equipment like laptops, business cards, and telephone and internet usage (keep a copy of your itemised telephone bill!).
HMRC defines allowable expenses as being ‘wholly and exclusively’ incurred in the performance of your duties, so as long as the items are not too frivolous (sorry, no coffee machine) you won’t have to pay National Insurance or Income Tax on it.
As a freelancer, you may often fork out for travel, accommodation and subsistence, should you need to, which are all claimable as business expenses alongside payments relating to your business for services like accountancy, advertising or insurance. If you’ve got kids, HMRC deems childcare vouchers acceptable to claim on if you’re already in the scheme (It was replaced by the tax-free childcare scheme in 2018). You’re also entitled to a tax relief on things relating to your physical well-being, like medical insurance and eyesight tests/glasses.
Travelling to work
You can claim 45p per mile on the first 10,000 miles of business travel in the tax year. After that, it goes down to 25p per mile. Motorbikes differ slightly with a blanket rate of 24p per mile. It may come as a surprise to many, but if you’re working as a limited company, you can even claim 20p for each mile travelled on a bicycle. Sadly this is not available to sole traders, though they should be able to claim the costs of a bike used for commuting. Avoid excessively using taxis, as HMRC don’t tend to accept these as necessary expenses.
Tolls, congestion charges, and parking fees (not fines!) are all allowable, but as always, make sure that you keep all your receipts and a mileage log.
How do I go about actually claiming expenses? Keep accurate records of every transaction as proof of your costs. If you’re working through your own limited company then your allowable business expenses will reduce your Corporation Tax bill. If you’re working as a sole trader your expenses will reduce your business profits, lowering your personal Income Tax bill.
January 31st is Self Assessment deadline day each year - so you have until then to get all your paperwork in order and submit your personal tax return to HMRC. When it comes to filling in your Self Assessment tax return, add up all your allowable expenses for the tax year and insert the total amount. You don’t need 40 to send in proof of expenses, but always keep proof and records for six years. Our Self Assessment article explains it all. We've got handy articles on expenses for limited companies and expenses for sole traders to give you all the details.
Bookkeeping
Bookkeeping is far from the most glamorous part of freelancing, but it becomes far more difficult than it has to be when it’s left until the very last minute. A big no-no is to hide all your receipts in a box and retrieve them with a few hours left before the tax deadline.
A year’s worth of bookkeeping in one sitting is a hefty task, but split over 52 weeks, the same task becomes much less daunting. Set aside half an hour every week to send invoices, record expenses, reconcile your bank account, and chase overdue payments. This way you’ll always have a good idea of your tax bill, reducing the risk of being stung by the taxman at the end of the year. Our article on bookkeeping and why it matters is a good place to start.
Scan your receipts
As we discussed earlier, it’s a good idea to scan your receipts and back them up online somewhere to avoid them getting lost or worn out. Once your paperwork is safely backed up online, you can de-clutter with confidence, as HMRC accepts scans of receipts if the physical copy isn’t available.
Crunch has a simple receipt scanning tool built into the app, so you can snap photos on the go as and when you make a business purchase.
Need more support?
With Crunch’s subscriptions, there is an array of support available to fit your business needs. For freelancers earning under £40,000 per year, CrunchOne is an ideal solution for managing all things accounting, including access to expert accountants to answer your queries.
We also have qualified Chartered Certified Accountants at Crunch who can support our Crunch Free for a one-off fee through our ‘Ask an Accountant’ service. For our Crunch paid subscription clients, you get unlimited access to an accountant.
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