3 Key Areas to Research Before You Start Freelancing

3 Key Areas to Research Before You Start Freelancing

Let’s explore three key areas you need to research before you begin your freelance journey: your business setup and registration, understanding your tax obligations, and ensuring you have the right insurance.

1. Your Setup & Registration

One of the first steps to freelancing is deciding how you’ll legally structure your business.

Key Considerations:

Registering with HMRC: What you need to do to set up depends on your type of business, where you work and whether you take people on to help.

Familiarize yourself with the HM Revenue & Customs (HMRC) website and resources and register with HMRC. This informs them that you are self-employed and ensures that you can pay taxes on your earnings. Registering is an easy and quick process, usually completed online. This step is critical because it allows you to legally work and receive payments.

2. Understand Your Tax Obligations

As a freelancer, you are responsible for managing your own taxes. This means understanding both Income Tax and National Insurance (NI) contributions on your profits.

What You Need to Know About Freelance Taxes:

• Income Tax: Freelancers must pay Income Tax on the profits they make. To avoid any surprises at the end of the year, it’s crucial to keep track of your earnings and set aside money for tax payments.
• National Insurance: As a freelancer, you’ll also need to pay National Insurance contributions. National Insurance helps you qualify for benefits such as the State Pension and healthcare.

Planning for Taxes:

• Set Up a Tax Savings Account: Since taxes are not automatically deducted from your earnings, it’s important to set aside a portion of your income for taxes. A good practice is to open a separate savings account specifically for tax funds. Many freelancers set aside around 25-30% of their earnings to cover tax and NI.
• Complete Your Annual Self-Assessment: As a self-employed freelancer, you’ll need to file an annual self-assessment tax return with HMRC. This allows you to report your income, claim allowable business expenses, and calculate how much tax you owe. HMRC’s online portal makes it easy to submit your tax return, but make sure you’re familiar with the deadlines to avoid late filing penalties.

Planning ahead for your taxes and setting aside funds throughout the year will ensure you’re prepared when it’s time to pay.

3. Research Business Insurance

While it might seem optional, business insurance is crucial for freelancers.

Types of Insurance to Consider:

• Professional Indemnity Insurance.
• Public Liability Insurance

Why Insurance Matters:

Some clients may even require proof of insurance before they hire you, especially if you’re working with sensitive data or on large projects. Even if your clients don’t ask for insurance, it’s wise to have the proper coverage to protect yourself and your business.

Before you dive into the freelance world with FREEELY, understanding your business setup, tax obligations, and insurance needs is essential to building a solid foundation for your career. By doing your research and planning ahead, you can focus on doing what you love—while leaving the administrative details and risks in capable hands.

*Please note that any information we provide in our blog or newsletters is for informational purposes only and is not intended to be or replace legal advice. You are always responsible to conduct your own research and due diligence to ensure you comply with all law and regulations applicable to you as a freelancer or when working with freelancers.

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