Our latest webinar, in conjunction with ipse, covers the ins and outs of making the leap towards working as a freelancer or consultant.  We’ve collated all the questions here alongside our jargon free answers.

How can I legally start my own online business and how can I reduce risk?

The first thing to consider is whether or not you need to register with the ICO. If you are keeping customer information then you will need to register with them and pay a fee each year. You will also need to consider what policies etc. you will need on your website. The ICO have recently released a tool that helps you to prepare a privacy policy for your website, which will detail how you hold customer information.

To reduce risk, you should ensure you have appropriate insurance to cover any claims made against you or your Ltd company.

Working through an umbrella company

As we discussed on the webinar, working through an umbrella company is a really easy way to work as a contractor or freelancer, but it does take away any opportunities to mitigate your tax liabilities. If you are inside IR35 or taking a one off short contract it can be a great way to keep admin and risk to a minimum.

Should I register for VAT initially or wait until the business reaches the threshold?

This depends on your circumstances. For most people invoicing other VAT registered businesses you will almost certainly be better off being VAT registered – your client will be able to reclaim the VAT that you charge them. For those dealing with non-VAT registered businesses or the public, you may want to hold off on VAT registration until you have to – either your customers have to pay more for your services, or you will just be paying over 1/6^th of your profits to HMRC.

What T&Cs should you include in your proposals so that they form a contract with the right levels of protection for yourself?

A lot of contractors and freelancers will have terms provided to them by their client or agency. However, if there are situations where you need to create your own contract then you should take legal advice in order to create something appropriate. It’s worth remembering that the contract is there to protect all parties so any clauses that will mitigate the losses of one as a result of actions of the other will always go a long way to making sure you are all protected.

Business insurance and what is required – especially if your clients are not UK based?

It would be worth discussing this with an insurer directly – they should be able to talk you through the different types of cover and the levels that would be appropriate for you and your business.

Can I work as a sole trader or through a UK Ltd company in a foreign country?

You can work as a sole trader in a foreign country but it is worth noting that the income will be reported in the country that you are a tax resident.

Working through a UK Ltd company is also possible but is only advised if you are a UK tax resident. If not, then using a UK company is not likely to be appropriate. You also need to make sure that if you are VAT registered you are clear where the place of supply is and whether VAT should be added to your invoices.

How do I find work and can you recommend any agencies?

We cannot recommend any agencies but there is no harm in checking online job boards to find something suitable and then registering with any agencies that have suitable roles. You may find that an agency would find you multiple contracts so building a rapport with them could go a long way.

If you work in something more creative then it may also be important to have a portfolio on hand – this could be a section on a website or simply an Instagram account showing off previous work.

What are the best pension options for freelancers and consultants?

This really depends on whether or not you have a financial advisor or not. If you don’t then it would be finding one as they will be able to use investment products that you just do not have access to. If you do have an IFA you should consider whether the investments they are making match your risk appetite, as well as looking at social impact & responsibility (looking at things like green initiatives/labour conditions etc.) and making sure these line up with your values and beliefs.

Foundations of business

The key fundamentals when setting up as a consultant or freelancer are to remember that you need to be paid on time, pay all of your bills on time and keep some cash aside for your tax liabilities. Here at Integro, we take care of keeping everything else on track and will do all we can to make sure all of your returns are filed on time and all taxes paid when they should be. Using bookkeeping software will help keep this a lot easier.

Bookkeeping

We recommend using something like FreeAgent, which can handle all of your day to day needs. This covers general bookkeeping and data entry, as well as being able to file your VAT & PAYE returns. They have also recently improved their receipt capture add on which, for a small fee, can upload an image of an invoice or receipt and add it straight into your records.

If I’m already incorporated, should I dis-incorporate?

This really depends on your circumstances and your plans for the future. As we mentioned, we presented a webinar in October 2023 which covered whether work as a sole trader or through a Ltd company was best for you. Please do get in touch if you would like to go through this in more detail.

Tax implications of trading as a sole trader v Ltd company?

This is something we covered in detail in our October 2023 webinar. Please feel free to check this out as it covers a lot of the comparisons and advantages to both.

No particular question; looking forward to information about tax planning, any advice about legal paperwork and insurance.

I hope you enjoyed the webinar and found it useful! Tax planning was covered in much more detail in the webinar we presented with IPSE in October 2023. IPSE have resources RE the legal side of things and also provide some insurances – your insurer or broker will be able to take you through the level of cover you and your business need.

Interested in next steps after setting up company. Things like accounts, insurance, VAT returns etc.

Firstly, I would recommend getting insurance as soon as you have a contract and a start date. You should also consider the position RE VAT and whether a mandatory registration is required – if not then this depends on your circumstances, mainly how much you will invoice and the sorts of costs you will incur. If you do register for VAT then you will need some sort of MTD compliant software, like FreeAgent, to handle the bookkeeping and then submission of the returns. We would be more than happy to book in a call to go through this with you.

Is there a maximum level of income whereby there is no advantage in setting up a Ltd company and I should stay self employed?

No, but this does work the other way around. As a sole trader, there usually comes a point when it is much better to work through a Ltd company, especially as there are more options when it comes to expenses, mainly better relief on pension contributions and the ability to have a company car etc. You will also have the opportunity, if it works for you, to employ a spouse/partner, as well as pay them dividends, which would normally be taxed at a lower rate.

Please explain the legal standing of an umbrella company. Aren’t they just another Ltd company running a payroll like ours would?

It is, but as all of the income is being paid via PAYE, HMRC are not too worried about the employment status as it brings in the maximum amount of tax for them.

What’s the typical day rate differential working within an IR35 and outside IR35 i.e. through your own company

We touched on this in the webinar and it is difficult to say as the rates are often different, with the inside daily rates being higher to take into account the additional taxes that would be due. When presented with two contracts, one in and one out of IR35, it is important to make sure you prepare sound forecasting to show the true difference, also taking into account some of the other costs that you’ll incur when running a Ltd company.

What are some strategies for managing client relationships and expectations as a freelancer or consultant?

In short, you just need to do whatever it takes to keep your clients happy. As you progress through any contracts you will get a feel for their needs and whether they need regular updates or just a ‘everything is fine’ message every now and then. One way to help this could be to have a business only mobile phone, as well as having your business email address, so that you know all communications on those accounts are purely business and need to be dealt with appropriately.

How can I set my daily/hourly rate or increase it when my clients set it?

When setting your own rates you should do some research into what similar roles are being advertised at. Of course, there will be some that are set well below or above the average but it is important to make sure you are putting yourself in the best position to get work without selling yourself short. In most cases, though, the client or agency will set the rate and this is what will be offered.

How best to market your services and build your customer/client base?

As we mentioned, there is no one size fits all – what works for a graphic designer is not necessarily going to work for a lawyer so it is important to use the appropriate channels to build relationships with your peers and potential future clients. This could mean registering with a couple of agencies, it could mean having case studies on your website, it could be an Instagram account showing off previous work or if you work on referrals it could be business breakfast clubs with other professionals. It is important that you try a few different channels and see which works so that you can maximise the benefit of this.

What are the major tax deductible expenses that freelancers can use?

Generally speaking, if you can justify that the cost relates to your business then it will be tax deductible. Of course, there are some exceptions to this.

Getting your first client whilst still on PAYE

The first thing to do is make sure that you don’t have any clauses in your employment contract that would stop you from doing this. Otherwise, it’s just a case of getting in touch with an agency or marketing your services as you would if you weren’t already employed. In this situation, you may find that working as a sole trader is best as it gives you the least amount of admin and responsibilities while figuring out if this will work.

Finally – How do I start?

Honestly, the best advice I can give is to just go for it. Start collecting information from advisors and check that this is the best thing for you, your circumstances and your family and start to put a plan in place that means you can make the leap! That doesn’t mean you should hand your notice in immediately – it could be a slow burn on the side of your current role until you have built relationships with enough potential clients to make enough profit to sustain the lifestyle you want.

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