tell me about free-lance/consultancy/being self-employed

[hatwoman]

tell me anything and everything.

do you have to set up a company? are tax returns etc a pita? how did you go about testing the water without effectively announcing your intentions to everyone in your (medium-sized and incestuous) industry before you'd made a firm decision? how does your freelance pay compare with your salary?

Can I ask what sort of company you want to set up? Will you have employees?
I was freelance, then dh & I become directors of a limited company to get tax advantages as we are in the same field. We take basic salary and make up the rest in dividends, all the paperwork is a pain, but accountant does tax and paye and we do vat and anything else. Don't know about testing water cos I don't know the area you're in.

no employees. just me. can't say what area really. it would be carrying out studies/writing papers, maybe some teaching, maybe some training (in that order of preference)

Will you be earning enought to pay Vat?

what's the threshold?

Oh God not an expert, infact quite rubbish with the money side but £50,000 ish?

the tax advantages of being a Ltd company are now very small - I wouldn't worry about that for a year or two.

as for the other questions - it's hard to say really as it varies. freelance pay is normally about double normal pay hour for hour I think (though I guess this varies in different industries), but you get no sick pay, holiday pay or job security. but I guess you know that. and testing the water - not sure you can do that if the industry is really incestuous. does your employment contract include a clause that forbids you from soliciting work from clients? how long for?

threshold for vat is about 60k

oh, and paperwork really not a big deal (esp if you are under vat threshold). It's a breeze compared to the spanish paperwork!

so if I don;t set up a company I just pay my cheques into an account; pay my expenses out of that account (?) and fill in a tax return every year (says she full of naive hope...). no way would I earn £60 k so no worries on vat

Hmmm Senora... I think paperwork is biggie, but then I did say was rubbish!
In theory, yes hatwoman. I think you should have a business account though.

As for pay, I'm in a very specialised industry so I'm paid a very high freelance rate, but the work is competitive, and erratic, with absolutely no security!

I worked out my fees/charges on the assumption of 200 working days per year.

Took working salary (gross) and divided by that to get a daily rate (and again by 7 hours to get an hourly rate). Pay your tax element into a savings account or similar (I really wish I did this!!!) so that you ahve it each year, bearing in mind that you pay 50% of next year's at the same time.

Oh...and you don't need to have a business account, as long as cheques are paid in your name. It makes for slightly more paperwork as it is best to record what is 'business' and what is 'personal'.

There is no legal reason to have a business account.

You do need to be very careful about restrictive covenants - a clause in your contract of employment that aims to stop poaching of clients etc when you leave.
We have a limited company - DH and I are sole employees and sole shareholders. I do the books, VAT, billing, payroll etc - once you've got your head around it all it's not difficult or especially time consuming. We have an accountant who does our tax returns and tells us what we owe in corporation tax (19%) - I could do it myself but my accounts still have to be audited annually. ANd I have to say when I've needed help the VAT/tax people (and MN!) have been very helpful. And DH acually does the paid work (IT consultant) - I'm mostly a SAHM, so from his point of view life is easier because I'm around to do the books.

The main downside we didn't really consider is the cost of holidays/time off - we're so conscious of the loss of earnings everytime DH takes days off that the temptation to just keep working is huge. An affordable holiday suddenly seems unaffordable when you add in the loss of earnings.

The main plus for DH (apart from more money!) is the fact that office politics/promotions etc don't bother him anymore - he used to get very involved and wound up, and he's far more relaxed now.

Don't forget if you're self employed you need to pay Class 2 NI contributions. I didn't know this when I set up and nearly had to pay a big fine but pleaded with them that I was foreign (I am) and didn't honestly know - and they let me off, let me pay the backward amount and that was it.

Freelance pay - Well I earn roughly half what I used to, but I work half the time. So I guess it's roughly the same

Don't worry about setting up a company until you are established. You need to register with HMRC as self employed within 3 months of starting. You will then pay National insurance (Class 2) of £2.20 per week (usually monthly by direct debit). No need for a separate business account but important to keep a good record of income and expenditure on a spreadsheet or in a book (ideally cross reference to original documents in a file). Watch out for the fact that your first tax bill (due on 31 January following the end of the tax year in which you start) will be large. You will pay 1.5 years tax. After that you pay half on Jan 31 in the tax year, half on 31 July following the end of the tax year. These are estimates (based on previous year) and on 31 Jan following the tax year you pay any balance due (or HMRC pay you back if your income has gone down).

My freelance pay is probably down on what I used to earn, but my expenses are less (no commuting) and the benefits of being able to dictate your own hours is invaluable.

I just don't know how 'ordinary' employees cope when a child is sick, or during school hols etc. It's hard to juggle home and work, and you need to be a particular type of person, who is focussed, but I haven't looked back since going freelance.

It terrified me to start with, worrying about what would happen if work dried up (I'm a single mum - so nothing to fall back on), but it was one of the best decisions I've ever made.

Go for it!

Ah but then hobnob, it depends on the kind of freelance work you do. I don't do the sort of job I can take a day off sick if I'm booked. I've got to be there, end of story...Sometimes (usually when the kids are ill!) I'm quite envious of people with employed positions, days holiday, sick pay. AND it can be very lonely expecially if you're not the self motivated type!

thanks everyone - this is all really useful. The restrictive clause doesn't count for me - I don't have external clients in my current job and in fact one of my main clients would (I hope) be my current employer. and I so relate to the office politics etc and the flexible hours thing - both key reasons for doing it.

I am a limited company. You pay loads to an accountant but do I think save overall.

Am doing a business course and what Roquefort says is the same as we're being told. (There is £100 fine if you don't notify tax office within 3 months of starting trading.)
The tax office do courses and have advisors if you need more help. For a small business you don't really need an accountant, it's a case of keeping all paperwork and keeping the right records, receipts etc.

I considered being a ltd co, but I didn't think it would be worth it if I wasn't earning a huge amount at first - the extra paperwork is considerable, and you do need an accountant then.

There are business advice centres who can give free advice, though TBH I found books from the library as helpful as anything.

As we are doing a course, we have to write a business plan, do market research, etc. My DP has a company and has never done any of it, but it actually is quite good to have written goals, some idea of the competition, potential market, etc.

The British Library has a business section where you can look up the yearly accounts and reports of registered companies, though I've not got round to that bit yet, so I don't know what to do wwith the info...

I set up a business account so I could keep things separate for paying stuff, but I didn't set up a company

tax returns are fine, I never saw a reason to pay an accountant - the Inland Revenue offices are actually staffed (well mine is) with nice smiley people who want to help make it simple for you - I called and went in and they showed me what to do. If you do it online it works out the numbers for you.

my freelance pay is more per day than I would have got PAYE, though I do less work, so it comes out the same at the end of the year

I think I'm falling into this quicker than I thought...just got asked this morning to do some work. quite pleased actually. never had someone be so nice about me and my work. in fact, what the hell, I've been feeling so utterly shite recently about work that I'm going to indulge myself and tell the handful of lovely mners that might see this that the word "brilliant" was used. yep, hat's boss, brilliant. did you catch that? thought not.