Freelancing/Consulting: What are the options?

September 1st, 2008 by Richy B. Leave a reply »

Well, I did mention that I’ve become a freelance PHP consultant (although currently I’m more working in ASP/ASPscript) and that I’d write my finding/experiences up on this ‘er blog: but I’ve just been so busy recently, I haven’t even really had the time to keep up with my other projects. However, a question by an ex-colleague prompted me to write about the options there are if you are considering going freelancing/consulting. As per usual, this is not legal/accounting advice yadda yadda – if you want proper formal advise, find somebody you can pay to give you advice.

There’s three ways (as far as I’m concerned/aware of) you can go freelancing:

Work as a sole trader
Less paperwork, slightly less taxes than other methods, but some companies won’t allow you to work for them due to the fear of IR35 (where the tax man could later claim you were technically an employee for them and cause them to pay more taxes – not so much of a worry if you “work from home” though).
Work as a Limited company (this is the route I’ve taken)
Lots of paperwork (as the company and you are technically different legal entities and all monies etc need to be kept separate and accounted for), but has a higher rate of return on your money. You do need to keep an eye on the tax front (as you’ll need to file a return for yourself and your company). Also, as from April this year, you can operate a Private Limited company (Ltd) in the UK on your own: you no longer need somebody to act as a company seceteray or secondary director.
Work under an “umbrella company”
You are technically an employee of the umbrella company [so I believe] (so they sort out all the paperwork), but obviously they take their cut. I regret not considering this option a bit more (as just keeping tracking of my expenses such as mileage, food etc takes up time), but unfortunately my other business interest meant I needed to have things all under one label.

The accountancy company I use has a handy calculator on their site at http://www.sjdaccountancy.com/contractor_calculator/index.html and some other resources at http://www.sjdaccountancy.com/about/ourservices/recruiter_resources.html which may help you decide what to do (if you do decide to use them, please enter me as a referral on their site as I’ll get £50 – however, in the interests of fairness, I have to admit that whilst SJD is doing a good enough job, my partner (not business) is considering http://www.nixonwilliams.com/ for her books and they are cheaper (£75 per month compared with £95 for SJD). You don’t technically need an accountant (there’s no legal obligation), but they’ll be able to advice you on what can be counted as an expense, what can’t, what you can claim VAT back on (and advice you whether to become VAT registered, VAT flat-rate registered or not registered) and help ensure your tax forms (corporate and personal) are filed in time.

We both registered our Limited companies via http://www.uk-plc.net/companyformation/ and we both currently use Freshbooks for invoicing although I’m trying FreeAgent as it’s a lot more UK orientated and can deal a lot better with UK tax and even provides you with a profit/loss statement: it is more expensive though…

Well, that’s it for now – not a lot of information I admit, but hopefully enough for you to think about and to consider…

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This blog holds over 12 years of archived content - during that time, I may have changed my opinion of something, technology will have advanced (and old "best standards" may no longer be the case), my technology "know how" has improved etc etc - it would probably take me a considerable amount of time to update all the archival entries: and defeat the point of keeping them anyway.

Please take these posts for what they are: a brief look into my past, my history, my journey and "caveat emptor".

5 comments

  1. Sally Drake says:

    I work through an agency on short term contracts and found that the option to be “self employed” is a non starter as agencies will only refer you if you are using an “umbrella” or “limited company”.
    I have been using http://www.blevinsfranksaccountants.com as my accountants. So far so good, I choose them because I could pick what service I want from them and only pay for that unlike many of the freelancer accountants who charge a fixed fee regardless of what you use. In my opinion, when starting out, chek out with professionals all the legislation, there’s loads of it. Especially important is your contract and it’s IR35 status. If any contracts you have are found out to be within IR35 and you have not declared that, the Revenue make a retrospective claim and charge penalties on top. Happy freelancing.

  2. Tim Browne says:

    You mentioned SJD’s calculators, which got me thinking about this site: http://www.contractorcalculator.co.uk. It has loads of useful calculators for freelancers, as well as articles and other information on things like using accountants, etc. Sally Drake (above) mentioned IR35, which is really important and the website I mentiond has plenty of stuff on that too.

  3. Ed Molyneux says:

    Hi Richy – Ed from FreeAgent Central here – thanks for checking out FreeAgent.

    We’re working with a variety of accountants to develop packages which include both traditional accouting advice (very important), end-of-year compliance (tax returns etc – essential) combined with the easy-as-pie bookkeeping and invoice graphs/tax timeline of FreeAgent.

    I think the Nixon Williams fee you’re looking at is actually one of those packages, so works out even cheaper than SJD (effectively just over half the price if you factor in the FreeAgent subscription).

    Incidentally Blevins Franks are also our partners, although they don’t (yet) have a packaged offering. They come highly recommended, too.

  4. Hi Richy, I am pleased to say that Blevins Franks Chartered Accountants now have bundled FreeAgent with a complete accountancy package for just £65 a month.

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