When you finally decide to make the leap into freelance, you might be unsure about where to begin. Unfortunately going freelance isn’t always as clear cut as forming a company and starting to trade.
In 2014 there were 1.4 million freelancers working in the UK across all sectors. With a figure like this that is rising by the day, it’s good to know you’re not alone when you want to go freelance. Regrettably, it does mean that freelance competition is only getting fiercer.
As freelance work hots up and more of us leave the office and opt for a more flexible work routine, it leaves very little room for error – unless you want your business to fold within the first year. Know the ins and outs of setting up as a freelancer in order to remain on top.
When Does a Hobby Become a Business
If you have a hobby you love and you think you could earn a reasonable amount of money from it there’s no reason why you shouldn’t take it freelance!
Don’t forget the technicalities of going freelance in your excitement of starting a new business. Although you might not be earning anything from it at the moment, if you intend to you must inform HMRC.
Freelancers have the option of either registering as a sole trader or forming a company and operating as a limited company. Find a full list of the benefits for each here, and figure out which is best for you.
Generally, the rule is if you’re trying to earn a profit (or expect to at some point) through your hobby, you should inform HMRC and register it as a business. You should also keep records of the business and consider the amount of time you put into it in order to determine whether it is a viable business.
Keep It Small
After you’ve decided to turn your hobby into a business, you need to decide how you’re going to do it. Often this is the point where freelancers get very excited and start to buy mugs/mouse mats and t-shirts with their new logo on.
If you take one thing away from here, let it be that a) no one buys mouse mats anymore and b) you need to save all of this energy. Instead of wearing yourself out by erratically purchasing every kind of merchandise product you can, calm yourself down and have a cuppa.
Now you can start thinking strategically about how you are going to approach building up this new business. Rather than thinking on a ‘purchase a billboard’ kind of scale, keep it small until you have a solid client base and a good reputation.
Unless you’ve got some friends lined up who are willing to pay decent money for your freelance work (no freebies!), you’ll need to get a portfolio sorted straight away. A hard copy is great, but where are your clients going to see it? Unfortunately sticking it on the cork board in the community centre won’t be the same as tweeting about it.
Get yourself a website set up and start figuring out the best way to display your portfolio. WordPress hosts great themes for every kind of business, whether you’re a writer, artist or jewellery maker. If you’re not sure about how to get started online, speak to other small businesses to help get yourself up and running.
Stick to What You Know
Once you’ve begun trading, it can be tempting to expand in whatever way you can in order to get your business seen. It’s both exciting and worrying for new freelancers, as there’s always a risk that you’re going to branch out a little too much.
Spreading yourself too thin is a risk, and if you don’t balance your workload correctly, you’ll be in danger of it. If you’re a writer, don’t feel obliged to say yes to a project where you don’t think you have the best knowledge, or you’re unsure how to access the correct information.
Likewise if you’re a photographer, don’t feel like you have to say yes to wedding photos if you’re dead set against it. Stick to what you’re comfortable with until you’re ready to leave your comfort zone.
Know the Laws
Freelancers have to learn all that ‘tax stuff’ if they’re going to work full time, as dull as it sounds. Getting your own accountant will really give you peace of mind, and give you the chance to focus on giving your clients your best work.
One of the big draws of going freelance is that you’re not chained to a desk in a nine to five job. You can travel the world and still produce great work for clients. There’s no boss to deny you a yearlong holiday, submitting your accounts from a Caribbean Island while you’re sipping a martini.
But with freelancing abroad comes a whole new set of ‘tax stuff’ to tackle. Depending on the country you’re planning on being in, you might not be able to work there at all, so get clued up before you board the plane. See this guide to prepare how to freelance abroad.
Have you turned your hobby into a business? Drop a comment below with your story!
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We work very closely with our expert accountants to bring you the latest factually correct tax and accounting news. We also enjoy writing about small business news that we hope you find useful!