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Financial Freedom as a Freelancer

3 Mins read

In 2016 some two million freelancers were working as part of the gig economy. Since 2020, these numbers have grown thanks to the impact of the pandemic and the realisation that we are free to work from wherever we choose. 2021 and 2022 have been defined by the Great Resignation, as professionals have walked away from organisations in preference for a different lifestyle and greater financial independence.

Yet, working as a freelancer shouldn’t be seen as the easier option. It is essential to consider the additional work required to maintain your business and maintain your well-being. You not only have to make your career of choice, whether it is copywriting, accounting, design work or consultancy, but you will also need to pitch for work, manage contracts and issue invoices. While freelancing means you can follow your passions with flexibility, it requires a lot of discipline and accountability for your finances’ continued health.

Freelancing is an excellent way to secure financial freedom, yet it must be done with care and attention to compliance and legal issues.

Getting a suitable contract in place

There are freelancing websites that offer a form of contract between you and your clients and can protect your income. These websites will charge a significant commission per job you complete for this intermediary service.

If you want to manage and maintain your clients yourself, you will need a contract in place. There is no UK legislation to protect your rights as a freelancer, so you may find difficulty in seeking timely payment without one in place. It is tempting when you first start to think you can work informally and so without a contract. However, your first encounter with a problematic or unreasonable client will help you learn the painful lesson of why a contract is necessary.

There are template contracts available on some freelancing sites. These contracts should lay out the payment terms and schedules and the tools you will use to complete the work. For instance, you may need to subscribe to Adobe Photoshop or the business analytics software to complete the contract. If this is the case, you should lay these expenses out in the agreement and request a retainer to cover these charges.

IR35 Compliance

Management of tax is one of the more complex areas of freelance life. Each year you will be expected to complete a self-assessment and declare your income. While this requires you to maintain good records, it is not as challenging as imagined.

IR35 adds a level of complexity to your tax concerns. IR35 covers two tax laws that seek to prevent tax avoidance by freelancers and employers. If you are being paid much of your pay as a freelancer for a company that would ordinarily need to be covered by an employee, then there may be issues. Consequently, you need to request an IR35-compliant contract.

If you work without an IR35-compliant contract, you may be paying more tax than you need. It could mean the difference of £7 an hour difference in pay. Therefore, to secure your income is all you hope it can be, it is vital to seek legal or tax advice. 

Intellectual rights and rights to reuse

Another area of legal challenge can be the right to use your work. Generally, when you are hired as a freelancer, your ideas are given as part of the contract, and the client has the right to use these. However, in the process of your work, you may offer additional ideas that are not used immediately and templates that may have value. 

It is essential that your contract layout details the rights to use the work to protect your intellectual property. It will help if you protect your work, as it is what will secure your financial future. 

Conclusion

Much has changed in the world of work in the past few years. Even without the pandemic, more and more people were looking to work freelance and pursue financial independence. As the UK law evolves to take account of this change in our work practices, it is vital that you do what you can to protect your work. Getting advice from a solicitor, financial, and tax advisor can ensure your independence is secure.

Laura McLoughlin is a Digital PR based in Armagh, Northern Ireland. She has previous experience as a website editor and journalist, and currently works with Mackenzie and Dorman.

Freelancer stock image by Vadym Pastukh/Shutterstock

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