What kind of freelancer are you?
There are many different kinds of work done by freelances: marketing, web design, graphic design, journalist; actor etc..
Behind all of this is the fact that there are just two ways of earning money. You can either be:
- employed, or
The word freelance can cover either of these two types of earning, and it’s important to know which you are before you agree to do some work for someone.
In fact freelance can be a very confusing term. It means different things to different people.If there is one common description of all types of freelance, it’s that the work is temporary.
Why it matters
Being employed means you are put on the payroll and the employer has to pay your tax and national insurance on your behalf under the PAYE (‘pay as you earn’) system.
They should also be giving you the tools and skills to do your job.
Typically a freelance who is employed:
- is part of the organisation
- works at the employer’s premises using the employer’s equipment
- works fixed hours
- might get sick pay
- gets paid weekly or monthly via the payroll, usually without invoicing
Typically a self-employed freelancer:
- has lots of different sources of income (ideally more than one client over any 9 month period)
- sets his or her own hours – can decide when to work and when not to work
- sets his or her own rate(s) through negotiation for each job
- provides some equipment, or specific skills, to do the job
- invoices for payment and runs the risk of late payments (or clients refusing to pay)
- has to correct his or her own mistakes
- has to keep records of income and business-related expenses, and transfer that information on to tax return every year
This is not a definitive list – for example some self-employed freelances work at a client’s premises using the client’s equipment. But it starts to hint at some of the practical differences.
For example, freelancers who are self-employed have more opportunity to negotiate their rates.
- They have to ensure they maintain their skills by investing in training.
- They have to be organised enough to fill in a tax return.
- They have to save enough money to meet a tax bill which might come more than a year after they were paid.
Even if you’re normally paid via PAYE as an employee you need to be as organised as possible because of the temporary nature of the work you do.
This course aims to give you the skills and advice to become better at all these things.
Later in the course, we’ll be looking in more detail at how tax works for you. There are plenty of practical tips on how to keep records later on.