Top Ten Freelancing Misconceptions

Making the decision to begin freelancing is definitely not one to be taken lightly. However, there are certainly a lot of misconceptions that come with the territory. We’ve taken ten of the most common presumptions and blasted them wide open, for a happy, successful freelancing career.

1 – Freelancing gives you a lot more free time

When you announce that you’ve made the decision to go freelance, you’ll undoubtedly be met with ‘supportive’ soon-to-be-ex colleagues gushing about the fact that ‘at least you won’t have any more early mornings!’.

Sadly, that’s not necessarily the case. Whilst some days you might be able to sneak in an extra half hour in bed, if you want to keep on top of things, you should be working the same office hours as everyone else. This is mainly so that clients can get hold of you, but it also gives you some structure to your day and keeps you in the habit of working 9 to 5.

2 – Being a freelancer makes you loads of money

We’ve yet to meet a freelancer who cashed in during their first few weeks of leaving their office job, so you will probably have to stick at it for a good while before you can afford that second home in the Caribbean.

Whilst some people do charge quite a high hourly rate, the reality is that you’re not working every hour of every day, so it’s a bit of a moot point. There’s also only a certain amount of work/clients that you can service on your own, so it’s important to take it just one step at a time.

 3 – Freelancing means you don’t have a boss

You may be glad to get rid of that stuffy CEO who is stifling your creative flow, but just because you’re a freelancer doesn’t mean that you don’t have anyone to report to.

Clients and others who are paying for your time are expecting a return on investment for their cash, so not doing the work you have agreed means that you’ll certainly have someone to answer to.

Not meeting deadlines is frustrating for those who are expecting a finished product, and it will also earn you a less than desirable reputation. Treat those who you are doing work for as if they are your boss, and it should help to keep you on track.

4 – Freelancing is much less stressful

Another regular misconception that a lot of people have is that freelancing is far less stressful than ‘regular’ employment. We hate to break it to you, but this one isn’t true either.

Your schedule hours are a lot more flexible, and you do have a certain amount of freedom, but these do not necessarily a walk in the park make.

Not only do you have to be constantly on the look out for new work, you also have to structure your own time, organise your workload and then find the time to do all that work… by yourself. There’s little delegation in the freelance world!

5 – Being a freelancer means you’re lonely

A life without colleagues isn’t the be all and end all, and freelancing doesn’t necessarily have to be a lonely profession.

Not having the constraints of office life means you can arrange to meet clients and other business contacts for lunch and coffee, getting you out of your homemade office.

Thanks to the wonders of social media, there are thousands of meet-ups around the country, so why not investigating what networking events and meet-ups are going on in your area? It’s a great way to meet new people, make friends and try and snare some new business!

6 – You have to take any work you can get

No-one wants to turn away business, but just because you’re a freelancer doesn’t mean that you have to accept that job for your Aunty Jackie’s sister’s brother’s new plumbing venture.

Don’t get us wrong, it’s lovely when people think you’re worthy enough of supporting their business, but just because you’re not based in a regular office job doesn’t mean that you have to take it.

We all like doing a couple of feel-good jobs for free to help out friends and family, but sticking to your professional network will probably mean more success on the new business side of things.

7 – Anyone can do it

Similar to the assumption that freelancing is easy, a lot of people think that it’s possible for anyone to be a freelancer. However, we’d have to disagree.

You need a variety of skills to be a freelancer, just as you need a variety of skill in any other job. Good time management and organisation skills are key, and you have to be confident in what you do and how well you’re doing it in order to win new business.

Freelancing isn’t just a job that you can fall back on, and if you don’t put in a considerable amount of effort, then it’s unlikely you will succeed.

8 – You don’t have to pay taxes

Getting yourself an accountant is one of the first things you should do when you become a freelancer, as registering as self-employed with HMRC can be confusing to say the least.

You need to take responsibility for both income and tax and National Insurance, which are calculated by reference to your profits as a stand-alone business.

Even beginning to think about tacking taxes by yourself can end up leaving you a bit frazzled, so we’d definitely recommend getting a professional in to help, at least while you’re finding your feet.

9 – Freelancing limits future career opportunities

A number of people worry about life after freelancing, but moving into self-employment doesn’t mean that you have to stay there for the rest of your life.

Being able to be successful as a freelancer shows a lot of skills, many of which will impress a potential future manager. Many freelancers also see job opportunities with people that they’ve worked for on a freelance basis, so often you don’t even have to go through the tedious application stage.

Depending on the length of your freelance career, you should have a number of happy clients who are willing to give you an excellent reference.

10 – Get as many clients as possible on your first day

Don’t worry if you haven’t filled your books on your first day. You need to make sure you’re dedicating time to nurturing your business, as well as finding new clients.

Taking a few hours to make your website look top notch, spending a little bit extra on the design for some business cards that are going to make you really memorable and writing up a business plan are all things that will benefit in the long run, and mean that you can continue to grow your business.

September Contractor News Round Up

Your monthly round-up of September’s top contractor news.

HMRC stalks Sanzar loan scheme contractors

A number of contractors who took pat in freelance work in the UK via offshore vehicles are being approached by HMRC, which is hitting them with UK income tax assessments designed to boost its low yield from such Employee Benefit Trusts.

To advisers have confirmed that the tax assessments, from between 2008-2010, are being received by UK based contractors due to their use of an EBT from Sanzar Solutions.

Contractors to benefit from fresh PCG strategy

The first in a line of good news for contractors this month, as it was revealed that contractors will benefit from greater representation, an elevated media profile and new membership benefits as a result of a new PCG strategy.

The Professional Contractors Group is implementing a fresh strategy, as they see freelancers and contractor as a vital element of the UK’s economic recovery.

BIBA reaffirms code commitment

BIBA says that it will give more consideration to developing and producing a code of conduct, after a strategic review found that members would like the association to ‘play more of a role in driving up the level of professionalism’.

Freelancing careers become more desirable

Whilst it may be news from across the pond, it’s great to hear that freelancing jobs are becoming more desirable. It’s a bit of a sweeping generalisation to say that what happens in America will happen over here, but hopefully it will be a sign of things to come in the UK too.

Apparently 30% of the US workforce is freelance, totaling a massive 42 million workers.

Contractors help 79% of organisations to meet strategic objectives

Good news for the sector, as it has been revealed that contractors now help 79% of the UK’s client and employer organisations to meet strategic objectives.

The report brings more good news; as over a third of clients plan to increase their contractor use over the next quarter, showing a hugely positive change in the sector.

HMRC investigations yield from SMEs up a third

New figures released this month revealed that an increased focus on small and medium-sized businesses is proving fruitful for the Revenue’s teams, with overall investigation income from SMEs up to £565m in 2012-2013. This was up from £434m from the previous year, totalling a rise of 31%.

Contractor demand at twelve year high

Results were released this month, revealing that during August 2013, contractor demand reached its highest level since December 2000. This saw the fourth consecutive month of growth in the industry, and agency billings grew at the strongest rate in fifteen y

August Contractor News Round Up

Your monthly round-up of August’s top contractor news.

Small and Medium enterprise interest in freelancers is growing. The appeal of a short-term solution without having to shell out large employment costs. Hiring freelancers is becoming much more cost-effective for the companies. A report for the second quarter of the years shows that rises in specific industries ranged from 9.2% (logo design) up to a whopping 23% in the accounting sector. This shows that the self-employed are increasingly permanent fixtures in the everyday lives of some businesses. Read more…

Contractors are soon to have a say on their benefits and expenses. A report published by the Office of Tax simplification has identified ‘quick wins’ on how expenses and other tax dispensations can be dealt with. It reports that the P11D form and filling process will be subject to further work as it is known to be widely misunderstood. There will also be a ‘wholesale review’ of the current benefits and expenses.  The chair of the Association of Recruitment consultancies, Adrian Marlow said: “…Simplification of the tax system would probably result in removing the risk for agencies relating to the more extravagant tax avoidance schemes currently on offer. Therefore, this review can only be good for agencies, workers and the recruitment industry in the long run.” Read more…

According to a new jobs report, contractor vacancies in Scotland have reached a 31-month high. The decline in contractor availability paired with billings rising at their slowest pace since March of this year points toward an emerging skills crisis in Scotland. This means that there are just not enough suitably skilled contractors to meet demand. The biggest rise in demand and fall in applicants was seen in Aberdeen and its oil and gas industry, confirming that the industry is booming but the availability of skills is not. Read More…

HMRC have created a new scheme designed to help small companies and contractors/freelancers with their tax disputes. Following a two year trial HMRC have created a national team of trained facilitators to help resolve disputes using the ‘Alternative Dispute Resolution Service’. For a while now the service has helped businesses and individuals in disputes by being the middle man and helping each party understand each other and decide on an agreement.  Richard Summersgill HMRC’s Director of local compliance said: “Evidence has shown that by using the simple ADR service many disputes can be significantly shortened and resolved without recourse to Tribunal.” Read more…

July Contractor News Round Up

Your monthly round-up of July’s top contractor news.

Contractors face new “single compliance process” (SCP) from HMRC

HMRC have been developing SCP which they describe as a single framework in which the majority of future small and medium enterprise business compliance checks will be undertaken, catering for both single tax and cross-tax enquiries. HMRC hopes that SCP will:

  • reduce customer burden by reducing the time taken to complete enquiries
  • focus the intensity of the enquiry so that it is proportionate to the risks identified – concentrating on the rule breakers and potential rule breakers
  • improve the quality and consistency of enquiry work across SME

HMRC ramps up prosecutions for tax evasion among middle class contractors and professionals

In the 12/13 year there were 617 tax evasion prosecutions compared to just 302 the previous year. HMRC’s target in 12/13 had been 565 successful prosecutions. “In the space of just one year, HMRC has massively ramped up the numbers of cases it takes to the criminal courts in order to clamp down on tax evasion,” tax law specialist Jason Collins of Pinsent Masons said. He also stated that those being targeted aren’t those that owe large amounts of money but more likely were “people like doctors, dentists, lawyers, construction contractors and restaurant owners who have not declared amounts in the tens of thousands.” Collins also warned that HMRC is set to ramp up its criminal prosecutions for tax evasion over the next few years. Its target number of prosecutions for 2014/15 is 1,165.

Contractors in extractive sector likely to see a boost after Government measures

Recently announced government measures and consultations mean that UK shale gas exploration will accelerate. The measures include a tax package, community benefits and planning to help kick start the shale gas exploration. Obviously we’ve also seen a lot of issues with the shale exploration with the Balcombe protests over the negatives associated with fracking and worries over how it will affect the British countryside.

Service sector booms as UK heads toward recovery

New figures released show that the service sector (which includes freelancers and contractors) had recorded its best month since the beginning of the financial crisis in the beginning of 2006. This news helps to cement the fact that the UK is returning to economic growth. The sector growth is tracked by the PMI and the figure for June was 56.9 but leapt up to 60.2 in July. See the graph below, or for more info click the title link.

 

 

Don’t get caught out by AWR

AWR

The new Agency Workers Regulations (AWR) will come into force later this year and for those keen to be seen as outside the scope of the regulations focus will return to IR35 tests.

In the draft guidance “the definition of an agency worker excludes those who are in business on their own account”, but simply owning a Limited Company and putting your earnings through it will not be enough to put you beyond the scope of the regulations. Any dispute would require the worker to prove that their circumstances, arrangements and company set up genuinely support their self employed status.

A number of factors can be considered in this regard but it is likely that you will need to demonstrate a number of them to succeed in convincing HMRC. Contractors who take fiscal responsibility for any negligence in their advice and purchase appropriate business insurance will be seen as different to those choosing to rely on indemnity from the end client in the same way as an employee would.

Other factors which could be considered are the purchase of your own business equipment, computer hardware and software together with appropriate licences, personal protective clothing for site visits etc. In addition supporting your own professional development through training, or perhaps subscriptions for membership to a professional body in your chosen field.

All of these things are generally provided for employees but if you rely on them it could support the view that your status is only really in place for job flexibility or tax reasons and it would be likely to lead to additional scrutiny from HMRC.