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?

Hi HW,

I've been self employed as a consultant for 6 years. I've never had a seperate bank account so here is how I work it:

Clients pay on invoice seperated into fees and expenses (if they are paying). So for instance if they agree to pay me train fare to London then I attach my ticket.

I have a spreadsheet that has clients down one side and then anything invoiced on monthly columns. V. simple, so predicted in green, confrimed in black and then highlighted when paid into bank. It keeps monthly and yearly totals. New s/sheet each financial year. Only shows fees though and I insert a comment to match to invoice code.

Another worksheet keeps tally of hours/days per job/client.

All my invoices I keep electronically but back them up regularly.

Expenses - I have an envelope on the wall and stuff any receipts into it - tickets/lunches/ink cartridges etc. I don't have many expenses so only sort them out at the year end but you could do monthly if so inclined!

End of year - DP does my tax return but I could do it myself. He enters expenses into a s/sheet and checks my diary where I record milage. Any expenses paid by clients do not count of course. Then we calcualte a % of mobile/broadband/phone etc. and add to the total.

You also have to add in any interest earned on savings but not a prob for us right now!!

BTW do check out getting Prof Indemnity insurance - I should have it and in fact will have to get some for a new contract...any suggestions MNers?

Also be careful that you don't only end up with one client as the IR will not be happy. I also have to declare that I pay my own tax and NI on my invoices so that clients auditors are happy.

There you go - see I am incredibly lazy and disorganised but even I can do it.

at laundry's colour-coded system

I'm much better at colour coding than actually working at the mo tho.

Am waiting for a referal about strange lumps and have descended into a bit of a pit. One of the drawbacks for me of homeworking is that I am easily distracted by MN etc!!

BTW in answer to OP - freelancing for me means that I can work 2 days a week and earn much the same as fulltime salaried as a consultant in the voluntary sector. Good for me but does highlight the crap pay and low level of skills in the sector as a whole.

Orangina, re non-paying clients...

(this is all from over DH's shoulder - he's a contractor not a freelancer so there may be subtle differences)

Put in your T&Cs when you expect to be paid (28 days from date of invoice seems standard but 14 is common).
If nothing after stated, choose either a friendly phone call or a standard reminder letter (like the pink gas bill).

If nothing after further two weeks and you are really cross, send letter saying interest will be charged at 8% above base rate on the total - this is completely legal (Google 'Late payments of commercial debts act'), and you can even backdate the interest from the date of invoice. 6 weeks interest on a big invoice can work out to a lot.

If nothing still happens and they're seriously taking the piss, there is a line you can use (I forget the legal niceties, DH had a friendly solicitor help him) that basically says 'you haven't paid me or contacted me about payment in the agreed time despite reminders, therefore I must assume you are bankrupt and unable to pay, therefore I will report your company as bankrupt and you'll have to cease trading'.
DH has used this on a recalcitrant multinational and they leapt to pay him.

LaundryLover - Prof Indemnity Insurance does not really exist for my job (freelance medical writer) so in theory as a sole trader and not limited company my home is at risk if I was sued. To avoid this I have a contract which provides confidentiality for clients and protection for me. HTH.

I've found slow paying clients a major hassle since I went self-employed last summer.

Started work with one client in August for a contract until April. First payment didn't hit my bank account until November! This despite repeated requests for payment..it's awkward when you're still working with someone to get too arsey!

Same thing again with payment for December and January - have only just recieved cheque!

Re recording payments etc you have to find a spreadsheet system that works for you - i have a complicated one but it makes sense to me as what I earn each month is different to what I actually recieve as my payments always seem to be late..

I keep all reciepts in a document holder and try to sort them out every month..

I earn double freelance what I'd get employed in my field - but as others have said you don't get holiday pay etc..DH self-employed as well so Christmas was a real shock to the system for us not earning a penny for 10 days!

I love being aloof from the office politics too..and able to work at home most of the time...want your internet shopping delivered between 9-11am on a Tuesday? No problem to be at home to answer the door!

I'm learning all the time about what type of assignment works though...some projects aren't well thought out, I'm working with one organisation where my allocated 1.5 days per week just isn't enough to really get the project done, but it's all they can afford. You have to really think about each contract and whether it makes sense and allows enough time for the work to happen.

Strawberry - personally I wouldn't bother with Prof Ins either but a couple of my contracts are assessing for Lottery grants and they are insisting. Think it will only be a few hundred quid and will of course go as expenses.

Hatty, something that you said reminded me of a new thing I have started doing. When I cost up a job I add half to a full day for admin as sometimes I seem to spend a whole morning just responding to emails etc and this was never being paid for! I am lucky in that I have a very good relationship with all my clients and have never had a late payment problem but I think that terms in an invoice are a good idea.

My DP is also freelance and I must say we both love the freedom and flexibility. We get by on what we earn and yesterday were able to go for a walk in the sunshine and have a lovely lunch out.....

MrsBadger, I love your advice. You should offer yourself as a credit control consultant.

I will freely and frankly admit I do very little of all this. In that I have an accountant. I send said accountants, yearly, my bank statements, my receipts (filed by month), my invoices, and the spreadsheet recording my outgoings and earnings. At some point I get a bill, which I pay. The End.

this is all good stuff. (although some of it is starting to look a bit complicated...)laundry lover - interesting what you said about earnings as my sector is non-profit too. I've been informally offered my first piece of work today (yay - haven't even resigned, nor chased any work, and it's coming in already...), and I'm expecting to get it formally in a couple of weeks. I have no idea what to charge .

MI - out of interest, if it's not nosey, what does an accountant cost?

oh god mine is incredibly pricey, shudder to think how much, but that is because of my limited companiness combined with fact is not madly cheap accountant in the first place. BUT I don't have to think, at all, about any of all that. For which I am devoutly thankful: if I had to do my own accounts my pleasure in my job would evaporate rapidly.

Hatwoman - I'm non profit too...I think there is a real demand for freelancers in this area due to recruitment problems with salaries not being great...

My accountant charges £350 per year (am up North).

About a third of my work comes from word of mouth recommendations (including a lovely boss I used to work for who is now freelance too), about a third I pitch for from ads and about a third is from agencies who make a quick fee by charging an intro cost to organisations for my services.

Hope this helps and good luck!

my bf who lives in Devon, offers the service of doing all accounts and a tax return for £150-200

I think DP's accountant costs a lot more now the company is VAT registered.

I do tax returns for free. But then I am a bit wierd like that and just love doing them.

Redadmiral, that is just an accountants trick. it is neither here nor there. A few more checks, reconciling , perusing VAT returns, takes all of about 10-15 minutes extra.

I think that accountant has been so invaluable over the years that DP will overlook it. (He managed to get several thousnad pounds worth of fines for late payment refunded!!!)

o.k. I'll let him off

hatwoman - one freelancer I know has an oyster card just for work and charges accordingly.

Oh, I put my oyster on my work account. Also my mobile bill.

DH uses the car for work so opened a basic bank account with a debit card that is solely used for car expenses and petrol for work miles - makes the accounting much easier.

You can go on the flat-rate VAT scheme, which is really idiot-proof -- you charge out at 17.5%, and pay at the standard rate for your business type, which HMRC will tell you. Mine is 11% off the top of my head. If you have a low-outgoings business, you will come out ahead. Make sure you choose 'cash accounting', so that you only pay for money you've actually received, rather than for what you've invoiced.

I pay an accountant, for the reasons MI indicates. I think if you work from home you have to be careful about what you can claim for wrt your home expenses, otherwise HMRC can theoretically treat your home as liable for GCT when you sell. Or something. Anyway, it's a clause to stop you being too cheeky with claiming for your home heating, petrol, etc. I pay my accountant £500-ish for tax return and accounts. VAT I do myself. I am a sole trader rather than a limited company. Do take financial advice regarding your situation if you're planning to make a major contribution to the family finances -- I spend a rather large amount on insurance of various types (income protection, PHI, critical illness, blahdiblah). You should pay enough into your pension for it to hurt, according to my accountant.

Late payers: I invoice (my terms are 30 days), send reminder letter and phone call after 6 weeks, 4 weeks later send a slightly stroppier letter, 4 weeks after that send a formal letter saying I will take them to Court if they don't pay within 14 days. 28 days later I do an online Court claim. I do this a couple of times a year, and most people pay up at that stage, as long as you make sure you had the contract/paperwork sorted out before you started work.

hth

If you set up a company you are technically an employee and therefore can claim childcare vouchers. The maxiumum is £243 a month per employee. Me and DH own company together and we both take this so that means we don't pay tax on £486 a month - nearly £6000 a year. You cannot get this if you are self-employed.

yes, but if you are an employee, you have to pay full NI, plus employer's NI (11% plus 12% isn't it) instead of £7 a week.

but where can I find out about these vouchers?

We don't pay NI - take a small wage (£400 or so a month) which is below the threshold and the rest in dividends which is NI free.

Our accountant has drawn up the vouchers. He send them to us each month along with our payslips (for thh £400) and we just sign them and send them to the nursery.