Freelancing can be a dream come true: the freedom to work whenever and wherever you want, the ability to take days off, and being able to plan your work around your own commitments. However, for the majority of freelancers, self-employment can have many hurdles that they must work to overcome. Freelancers are not protected in the same way that employees are. It can cause many problems that you should take precautions to protect yourself from.
1. Check Your Taxes
No one wants to get to the end of the year only to find a large and unexpected tax bill on their doorstep!
- Self-Assessment: In the UK, freelancers must register as self-employed before the October of their second tax year and apply for a self-assessment tax return.
- Income Tax: Freelancers pay income tax on any profits over their personal allowance, which is £11,850 for the tax year 2018/19.
- National Insurance: Freelancers will pay Class 2 Insurance. If you earn over £6,205, you will pay £2.95 a week, which increases to 9% on your profits between £8,424 and £46,350.
2. Get Insurance
Every human makes mistakes. Indemnity insurance can prevent these mistakes from causing significant issues for your earnings. If a client claims any of the work that you have done for them, comprehensive professional liability insurance can ensure that you have protection against legal and compensation costs. As stated by Hiscox, if you provide services or advice to a client, then you are vulnerable to claims of this nature and should consider indemnity coverage. It will cover you in the event of a breach of confidence, negligence, or infringement of copyright up to the cost of £10 million.
3. Write a Contract
Another way to protect yourself and ensure that you receive the correct payment is by writing a contract for both you and the person you are working for to sign. By being able to show a contract, you will have evidence for any potential wage disputes that may occur. You will also be able to refer to this if your client decides to change or dismiss the agreement that you have made. If a client tries to establish rules that you are not comfortable with, such as control over when you work, you have a contract to prove that you have not agreed to these terms.
4. Use a Freelancing Service
Freelancing services take out the frustrations of communicating with a client directly. They create a back-up that will ensure that you are paid and reimbursed for any problems that you may face. Services such as Upwork provide an intermediator platform which can act as a buffer in case of problems. They ensure that you are paid on time and that each party adheres to the terms of their contracts. Although Upwork does take some of your income, this is worthwhile for the amount of protection that it affords.
Although freelancing can be difficult, you should not be deterred by potential problems. By taking the right precautions, you will be able to enjoy the benefits of freelancing without the stress of things like payment and taxes.