Stephanie Whalley

Total Post: 154

Serial snacker, compulsive cocktail sipper and full time wordsmith with a penchant for alliteration, all things marketing and pineapple on pizza.

About the Author

We know what it’s like to be a freelancer, so here at Freelancer News we love keeping you up to date with all the latest news, tips and advice for freelancers. We cover tips on how to get work as a freelancer, economic news which may affect the way you work and the best way to handle your accounts and finance.

To make sure you’re always getting the latest news, we’ve gathered a team of writers with specific expertise and industry knowledge. That way you know that our writers can handle any aspect of freelancer life that you might need help with. Below are the latest articles from Stephanie.

Can I Be An Influencer?

Can I Be An Influencer?

Ten years ago the term ‘influencer’ wasn’t a phrase many of us were very familiar with. Little did we know it would soon become a common word in most vocabularies, as well as a whole new category of self-employment, income stream, digital content medium, and marketing channel.

For those who still aren’t entirely familiar, an influencer is somebody with a large (and loyal) online following who has the power to influence sales of products and services—hence the name.

You’ll typically find influencers on social media platforms like Instagram, YouTube and TikTok but ‘influencing’ also extends beyond the most popular platforms into more niche parts of the digital world too.

 

Is being an influencer a ‘real’ job?


Yes, absolutely. In fact, according to a recent study by Adobe, UK social media content creators are now earning an average of £137,000 a year.

This is significantly more than other average salaries shared by the UK Government’s National Careers Service:

  • Solicitor – £100,000
  • Software developer – £70,000
  • Accountant – £65,000
  • Train driver – £65,000
  • School teacher – £42,000
  • Firefighter – £32,000
  • Nurse – £32,000

Although some traditionalists might snub the idea of ‘influencing’ being a real career, the potential earnings mean it’s fair to say that it’s an extremely valid and lucrative way of earning a living.

Plus, while it might look easy and glamorous at times, producing the kind of digital content that engages an online audience so effectively that you can turn it into an income stream takes a great deal of time and skill.

 

The growing appetite for influencer marketing


Not only does influencing have the potential to be an extremely profitable income stream for the content creators themselves, but it can also have a powerful impact on the success of the brands and businesses they’re affiliated with.

According to research published by The Social Shepherd, 93% of marketers said they had incorporated influencer marketing as part of their overall strategy. This means almost all of those surveyed had worked with influencers and content creators to:

  • Raise brand awareness (86%)
  • Reach new or targeted audiences (74%)
  • Improve brand advocacy (69%)
  • Increase sales conversions (46%)

The same study found that 61% of consumers say they trust influencers’ recommendations. With a statistic like that, it’s clear to see why so many brands and businesses rely on influencers to help grow their digital presence and boost the bottom line.

 

What do you need to be an influencer?


Technically, anybody can become an influencer. Due to the fact influencers can run their business anywhere in the world with an internet connection, it’s actually a super inclusive and accessible way to make money.

Plus, with free access to social media platforms and advanced smartphone technology, great potential really is at our fingertips these days.

This applies whether somebody is a full-time influencer or if they influence on the side to supplement an employment salary. It also applies whether somebody is an influencer with hundreds, thousands, or even millions of followers, or if they are what is known as a ‘micro-influencer’, somebody with 1,000-10,000 followers.

Unlike many jobs, you don’t need any specific qualifications to be an influencer and the nature of the role is extremely diverse and expansive. Age, experience, and location are some major factors that often determine access to ‘regular jobs’, whereas influencing is open to anybody who wants to give it a go.

That said, there are some areas which might be worthy of consideration becoming an influencer as a way to generate income, including:

  • Have a niche area that you specialise in and build your content around that
  • As well as having a niche, have a target audience that you want to reach and engage
  • Stay on top of your social media skills and the latest trends so that your content stays current
  • Make sure you have time to post regularly and interact with your audience, as well as liaise with the brands you work with
  • Be consistent—sporadic posts aren’t the way forward if you’re going to make a successful business from your online content
  • Analyse how your content performs closely so that you can do more of what works and less of what doesn’t. This requires some knowledge of analytics platforms, most of which are now integrated into the digital platforms themselves.

 

The pros and cons of being an influencer


Below are some of the advantages of the role, as well as some things to consider. It’s important to remember that influencing isn’t just about getting nice things for free and editing Instagram reels in your PJs.

 

The benefits of being an influencer

  • You have complete flexibility and autonomy over your own time
  • As with all self-employment income streams, any post-tax profit you make is all yours to keep
  • For people who are passionate about this line of work, it can be a whole lot of fun
  • You have the chance to positively influence a large audience and make a real difference
  • You get to try products, visit places, attend events, meet new people, and have experiences that you might not otherwise be exposed to
  • Start-up and overhead costs can be super minimal. All you really need to get started is the smartphone that’s probably already in your hand right now.

 

Some things to consider

  • Just like with any form of self-employment, you are responsible for generating your own income
  • Similarly, you are also responsible for reporting and paying your own tax
  • As influencing is so inclusive, this means that the competition is high too
  • There isn’t necessarily as much job security as with salaried employment
  • Even though it’s a lucrative industry right now, nobody knows the future of influencer marketing
  • You may well need to share a part of your life with the world online, and sacrifice some of the privacy and anonymity regular employees or self-employed people have

 
Think a career as an influencer might be for you? There’s only one way to find out! Head over to our hub to find more information and support for freelancers.

Places You Can Work Remotely from for Free
Do Freelancers Get Paid More than Employees?
What Freelance Jobs Can I Do?

What Freelance Jobs Can I Do?

There are currently more than 2 million freelancers in the UK, contributing approximately £125 billion to the economy. It goes to show just how significantly freelancing has grown in popularity over the years, appealing to people across sectors, specialisms, and levels of seniority.

There are lots of reasons why someone might choose to go freelance, such as redundancy, a desire to gain professional independence and ‘be your own boss’, or simply to earn extra income to supplement an employment salary

Perhaps you’ve got your own personal reasons for wanting to explore the world of freelancing. Either way, it’s essential to find the right freelance job for you if you’re going to succeed.

For some people, the freelance route they choose to pursue is an obvious choice. If somebody has been working in content marketing for a number of years, for example, then freelance copywriting is a natural extension.

But for others, their freelancing direction is not quite so clear, but that doesn’t mean you don’t have options.
 

What are common examples of freelance jobs?

Freelancing work isn’t restricted to any particular sector, but some are more popular than others, particularly in service-type industries.

  • Independent journalist
  • Copywriter/content writer
  • Social media manager
  • Influencer
  • Videographer/video editor
  • Photographer
  • Web developer
  • Graphic designer
  • Marketing
  • Public relations
  • Data
  • Software
  • Accounting and bookkeeping
  • Editing and proofreading

That’s not to say your freelancing work has to fit into any of those common categories. There are plenty of professions which translate well into a freelance capacity, with some lending themselves more naturally than others. Even things like customer service, sales, and interior design, which are more typically in-house roles, can be carried out on a freelance basis.

You might have your own specialism or skillset that you’re looking to put to good use. In fact, the more niche your offering is, the less competition you’ll have to face. Although that said, you might find there’s less demand for something more specialist.

 

What are the most in-demand freelance jobs in the UK?

Micro Biz Mag conducted research to find out which were the most in-demand freelance jobs in the UK in 2022. The findings were based on data from Google’s Keyword Planner, which shows how much (or little) people are searching for specific terms on Google.

The report revealed that the top 10 search queries with the highest average number of searches per month were for “Freelance…

  • Graphic designer
  • Writing
  • Copywriter
  • Web designer
  • Web developer
  • Photographer
  • Designer
  • Accountant
  • SEO consultant
  • Social media manager

That said, those are the findings of one study and are not completely representative of the full picture. So, if your skills and expertise don’t fall under any of the categories above, don’t lose motivation!

Demand for specific roles can shift depending on other factors too, such as season, budgets, and the wider economy. Do your own research to establish whether or not there’s appetite for what you have to offer.
 

What are the best paid freelance jobs in the UK?

Freelance management platform YunoJuno published its most recent Freelancer Rates Report in August 2022. The research compared average freelancer rates across 16 different categories within marketing, tech and the creative industries.

Overall, the average day rate came out at £368 but this varied significantly across different sectors and industries. The highest average day rates were in market research (£512), strategy (£492) and data (£486), while the lowest were in marketing (£318), social media (£307) and studio (£281).

Other areas that sat somewhere in the middle in terms of average pay included:

  • UX (£468)
  • Project management (£382)
  • Film and motion (£370)
  • Photography (£362)
  • Client services (£340)
  • Design (£436)
  • PR (£326)

While market rates are naturally going to be a factor for consideration, don’t forget to factor in your skills and experience when setting your freelance rate. Think about where you add value for clients, because this is what they’ll be looking for.

In YunoJuno’s report, for example, market research roles were shown to have the highest average pay. However, this sector also demonstrated the biggest gap between highest (£1,479) and lowest (£155) day rates. This proves that pay is highly dependent on a freelancer’s skills, knowledge and experience.
 

Can I freelance while working full-time?

If you’re already in employment and not looking to take the leap into full-time freelancing yet, you might consider setting up a side hustle. This is a secondary source of income outside your current employment that allows you to explore self-employment with the security of a PAYE salary behind you.

Unless your employment contract states that you aren’t allowed to work for anybody else while you’re in that job, freelancing on the side is perfectly fine. In fact, Henley Business School found that 1 in 4 UK adults have a side hustle on top of full-time or part-time employment.

Of course, if you do have an existing job to consider, this might limit what sorts of freelance work you’ll be able to do. Your full-time (or part-time) role will dictate what spare time you have to dedicate to a side hustle, so be sure to consider all factors carefully before you get started.

Another important thing to remember with side hustles are the added obligations around reporting and paying tax on your self-employment earnings. We’d recommend speaking to a qualified accountant who will be able to take any unnecessary stress and complication out of your bookkeeping and accounting.
 
Looking for more freelancing advice? We’ve got a whole hub of handy guides designed to help!

Can I Freelance on the Side?

Can I Freelance on the Side?

According to research published by Henley Business School, 1 in 4 UK adults have some sort of ‘side hustle’ – an additional job or secondary income on top of regular employment. It seems like more and more people are looking into freelancing as a way of making extra cash on the side.

Before you hit the freelancing jobs boards though, let’s take a look at some of the pros and cons of freelancing on the side, as well as what to look out for.
 

When you might NOT be able to freelance on the side

Before we delve into more exciting stuff like the benefits of freelancing and how to kickstart your new venture, let’s rule out any scenarios in which it might not be a viable option for you.

The biggest stumbling block you could potentially face is your employment contract. If you’re already employed, there could be something in your contract that legally prevents you from working for somebody else or having a freelance side hustle.

This might be particularly relevant if you’re looking to freelance within the same industry or for a competitor of your employer. For you, this might make total sense as your skills are easily transferable. However, in your employer’s eyes, this could be considered a conflict of interest.

It might be tempting to go ahead and hope you can keep your freelance work under the radar but breaching an employment contract you have already signed is risky business. Be sure to do due diligence before you steam ahead – or your side hustle might become your only source of income!

Before embarking on any side-hustle, it’s also worth pausing to think about whether or not you actually have the time. If you’re already super busy or have other commitments, could freelancing do more harm than good? Make sure you have the time and mental capacity for your new venture before getting started.
 

The benefits of freelancing alongside employment

Assuming your employer is happy for you to start a freelance venture on the side (or that it won’t be a disaster if they found out), and presuming you’re confident you’ve got time, there are some great reasons to get going. For instance, you could:

  • Earn extra income to supplement your salary
  • Explore an existing skill or passion that you’re keen to develop or put to good use
  • Develop and practice new skills at a pace and level that suits you
  • Get to experience the benefits of being your own boss and having professional autonomy over your work without the risks of full-time business ownership
  • Expand your professional network and build relationships in your chosen field
  • Do all the above, whilst protected by the relative security of your PAYE income

 

How to kickstart your freelancing venture

You’ve considered all the pros and cons, and given yourself the green light start your foray into freelancing on the side. There are some important steps you need to take next.
 

1. Decide how you want to structure your business

If the income you earn from self-employment is more than the tax-free trading allowance, you’ll need to register with HMRC as self-employed. For most freelancers this means registering as a sole trader, because it’s more straightforward, but you might instead decide to set up a limited company. There are pros and cons to each.

The main difference is that sole traders are not legally separate to their business, which means your personal finances and assets are connected to your business’s finances and assets. This can have consequences if your business owes debts that it cannot pay, because your personal assets will be at risk.

Limited companies, on the other hand, are separate from the owner, meaning any financial liability that the business has is also independent. However, setting up as a sole trader and paying tax is usually simpler.

Learn more about registering as a sole trader versus setting up a limited company.
 

2. Decide on your pricing structure

Working out how much you want to change for your services can be one of the trickiest parts of freelancing. In practice, it might be something you review and adjust over time. It’s important to strike the balance between earning enough for the value of your expertise whilst not getting carried away to the extent that you over-price yourself.

A general rule when it comes to calculating a day rate, for example, is to have an ideal annual freelance income in mind and divide backwards. Once you’ve got that figure, you can go from there. Use this as a starting point and then be as flexible (or inflexible) as you like with clients when they’re communicating their budgets with you.
 

3. Work out how and/or where you’re going to get work

How are you going to find work? Are you going to set up a website? Are you going to rely heavily on social media? Are you going to attend regular networking events to meet potential clients face-to-face and encourage word-of-mouth recommendations? It’s time to put a plan of action in place.
 

Tips to effectively manage your side hustle

Adding freelancing to your existing commitments is an exciting move but when it’s in addition to other employment, it’s vital that you manage it well. Below are some top tips to help you.

  • Maintain professionalism in your PAYE job and a good relationship with your employer
  • Establish and maintain strong relationships with your freelance clients too
  • Avoid burnout and still leave time to enjoy life (it can’t all be about work!)
  • Ensure all your finances and accounts are up to date and accurate

 
Be open, honest, and transparent with your clients
Let your freelance clients know you also have existing commitments so that you can manage expectations effectively and honestly. If a client isn’t willing to work with you because you have another job, it’s better to get that out in the open from the beginning.
 
Open a separate business bank account
Keep your personal and business finances separate to make things like budget management, spending and tax returns easier and more clear-cut.
 
Take strict measures to avoid burnout
Don’t cram your schedule with meetings and deadlines because you’ll only end up spreading yourself too thinly and, subsequently, underperforming. It’s important to take time to relax, rejuvenate, and enjoy the things you love too.
 
Work with a qualified accountant
With multiple streams of income and the added tax liability of self-employment, your bookkeeping and accounting naturally become a bit more complex. To save yourself time, trouble, and error, do some research about who might be able to help you.
 
It’s time to go out there and explore the opportunities freelancing has to offer!

Do Freelancers Need a Separate Bank Account?

Do Freelancers Need a Separate Bank Account?

Freelancing can be a really great gig, but it can be super tough at times too. Between managing your schedule, maintaining client relationships, going after new business, and chasing payments, it can often feel impossible to find time to do any work. “There are plenty of hours in the day”, said no freelancer ever.

It’s hardly surprising that the idea of setting up a separate bank account just for the business can seem like a right royal pain, but it can actually make things easier in the long run.

In fact, depending on how you set up your business, it might even be a legal requirement.

In this article, we explain when a separate business bank account becomes a legal obligation, and why most accountants recommend it anyway.

 

Does a limited company need a separate bank account?

If you operate your business as a limited company then yes, you will need a separate bank account. Your limited company is a totally separate legal entity, even if you’re the only owner and director, so keeping the finances separate is a requirement.

This distinction can sometimes be a deciding factor for start-ups when choosing a legal structure for their business. Because the company has its own legal and financial identity, any debts belong to the business, so there’s less risk to your own individual assets if things go wrong.

That’s why, as a limited company, it’s a legal requirement to set up a business bank account for your company which is independent of your own personal banking.

 

Are you set up as a sole trader?

Unlike limited companies, having a separate bank account is not a legal requirement for sole traders. Where the owner of a limited company is treated as a separate legal entity from their business, a sole trader is not.

This means that your personal and professional finances are inextricable in the eyes of tax and the law. Unfortunately, this also means you’re personally liable if the business hits any financial hurdles, putting your own money and personal assets at risk.

But although it’s not a legal requirement for sole traders to have a separate business bank account, there are plenty of good reasons for doing so anyway.

 

The pros and cons of having a separate bank account

Keeping your accounts separate is generally considered best practice for businesses. It makes it easier to track and manage the finances, so your accounts are more likely to be accurate, and there’s less risk of any errors creeping in.

Has all this got you thinking? Let us walk you through some of the benefits of setting up a bank account just for your business.

 

Having a separate bank account can make bookkeeping easier and more accurate

When your financial accounts are kept separate, keeping the books up to date is much more straightforward. With an independent business bank account, you can link it straight to your bookkeeping software without your personal finances getting dragged in too.

Your bookkeeping will automatically populate with your bank transactions, helping you stay up to date with much less effort.

Better bookkeeping is the secret to running a successful business. You’ll be able to keep an eye on the finances, follow up late payments, and stay more tax efficient. It even makes it easier to spot all those business expenses that you can offset against your tax bill.

 

Simpler tax returns

When it comes to tax return time, whether you’re filing a Self Assessment as a sole trader or a Company Tax Return as a limited company, separate bank accounts are a blessing.

You won’t need to pick through every single transaction to decipher what was personal and what was business-related. Your tax returns will be more accurate and therefore less at risk of penalties.

 

Credibility

Having a business account means you can make and take payments through a separate bank. This will boost your reputation in the eyes of your clients and suppliers, making your business appear more established than it might be.

 

Complying with some banks

Some banks insist that you have a separate business bank account, so it’s worthwhile getting one set up to eliminate any stumbling blocks for yourself further down the line.

 

Better budgeting boundaries

When you divide your personal and business finances, you’ll have a clearer picture of what’s what. Keeping your personal budget as a separate pot away from your business will help you protect cash flow and savings in both areas of your life.

 

Protecting your business credit score

Having a healthy business credit score is crucial for things like loans and investments. If your personal credit score isn’t so great and your finances are combined, this won’t stand your business in great stead.

 

More flexible transactions

Money is often constantly moving through business bank accounts and with personal accounts, there are typically tighter restrictions on things like withdrawals and transfers. Opening a business bank account will give you the financial freedom you need to operate your business efficiently.

 

Physical bank card separation

Another great benefit of separate bank accounts is different bank cards so that you can keep your personal and professional spending physically divided to avoid confusion. This is particularly important if you ever employ any staff who have access to bank cards too.

Whilst setting up a separate bank account might seem like extra effort, it’s fair to say that the benefits far outweigh any inconvenience. In fact, you could even choose to use the same bank for both sets of finances.

Some banks offer special access to interest rates or lending facilities not available to other customers, and you’ll be able access your accounts through the same banking app. In today’s scroll-savvy digital age, that could be particularly welcome.

 

Done here? Navigate over to our info hub for more freelance support and guidance.

Do Freelancers Need Insurance?
Can I Still Charge for A Project Which Didn’t Work Out?

Can I Still Charge for A Project Which Didn’t Work Out?

Unfortunately, this question is right up there with ‘how long is a piece of string?’. The short answer is that it all really depends on a whole host of variables, such as:

  • The reason the work wasn’t completed
  • The kind of relationship you have with the client
  • External influential factors which neither party can do much about

In most cases a commonsense approach is probably what’s needed, but freelancing isn’t always so straightforward.

So, let’s take a look at some examples of what happens when a project doesn’t work out, and what this means for billing. In some cases, charging the client might be appropriate, but there might be times when invoicing is off the cards.

 

When is it ok to charge for unfinished work?

In the following instances you’re most probably well within your rights to still charge a client, even if the project doesn’t quite go to plan.

 

If the reason it didn’t work out wasn’t your fault

We’ve all had that client where, no matter what we do, things just don’t work. If a freelance project doesn’t work out and it’s the clients’ fault, then you can definitely still charge them for your work!

A (surprisingly common) example of this is a personal trainer who has been working with a client to help them lose weight in the run-up to their wedding or a holiday. The personal trainer can only do so much to support the client, and ultimately, if they don’t follow the plan their PT provides, they won’t hit their goal weight. But that doesn’t mean they don’t have to pay the bill.

 

When the client swoops in with a change of plan

This one’s a bit trickier. If you and your client agree the brief, and then they change their mind, it depends on the timing.

  • If you haven’t started the work then unfortunately, you can’t really charge anything for your services (unless you have terms and conditions which say otherwise)
  • However if you’re part-way through something then it’s perfectly reasonable to request payment for the work you’ve done so far, or to compensate you for any materials bought specifically for that job.

 

If the client changes their mind about work you’ve completed

Our clients hire us for the expertise we bring, so there are very likely to be times that you find yourself on a job where the client isn’t entirely sure what they want the finished project to look like. It’s why it’s so crucial to get the brief right!

If you’ve already completed the work and it nails every point on the brief, but then the client changes what they need, then yes – they should absolutely pay you for the work carried out so far.

It’s up to them if they want to issue you with a brand-new brief for a refreshed direction and pay you for that too.

 

Examples of situations where you probably can’t charge

On the flip side, there are likely to be times where you either straight-up can’t charge the client, or you probably shouldn’t.

This is an important distinction to make because there could be times when billing the client simply isn’t an option at all, but at other times going ahead might be ethically or professionally questionable (and therefore best avoided).

 

Illness or other personal circumstances

If you’ve agreed to a project but then fall ill or become unable to fulfill the work as a result of other personal circumstances, such as the death of someone close, the client shouldn’t be expected to pay.

However, there are grey areas around this topic too. If your illness or personal circumstances means you have to pause or delay a project, but the client is happy for you to resume or start the work at a later date, then you can probably still charge as normal.
 

If the project doesn’t go ahead

In the world of business and project planning, not everything runs according to plan. Unfortunately, even after agreeing a brief, a project can still draw to a sudden halt.

As frustrating as this is, you can’t charge a client if you haven’t actually executed any work unless you have an agreement in place that says otherwise.

If you’ve spent time attending meetings or briefings, there might still be room to discuss invoicing to compensate for this. That will be between you and your client.
 

If you miss crucial deadlines

If the client is forced to deviate from their project strategy as a result of you missing deadlines or not producing work to the standard they expect, your right to bill them is on shaky ground, particularly if you’re looking at charging full price.

If the client must get somebody else to step in as a result of any of your own shortcomings, you will need to come to an agreement as they might want you to reimburse them for this inconvenience.

Of course, there’s a very easy way to ensure this scenario doesn’t arise and that’s to meet deadlines, produce great work, and manage client expectations. Did we mention how important it is to get the brief right?!
 

The benefits of client contracts and agreements

All of the scenarios above are general examples but ones you might come across when working as a freelancer. There’s rarely a definitive answer as to whether or not you can still charge for a project that doesn’t work out, so it pays to protect yourself as much as possible. One of the best ways to do this is by putting a contract or agreement in place with your client before you start any work for them.

This will also help you in situations that neither you nor your client could foresee or prevent. The Covid pandemic is a classic example of this, causing many clients and their contractors to abandon work.

In a contract or agreement, both parties can detail any insurance cover they have which might impact payment for projects or work that doesn’t take place.

An official document like this is also the perfect place to implement a milestone payment plan that you and your client can agree on. This means that rather than getting paid once all the work has been completed, you can decide on several milestone payment dates along the way.

Not only will this give you peace of mind when it comes to your cash flow, the client might also appreciate the breakdown of costs. Win, win!

Want to know more? Check out our Freelancer Hub for all things freelancing!

The Freelancer’s Guide to CIS Tax

The Freelancer’s Guide to CIS Tax

If you’re planning to work as a sub-contractor in the construction industry, then it’s worth knowing that most construction-based trades will fall under the Construction Industry Scheme. CIS affects how you get paid by the contractor who hires you, so this blog takes a closer look at what CIS is and what you need to do.

 

A quick introduction to CIS tax

CIS was introduced in 1971 to ensure that tax is collected from payments made to subcontractors in the construction industry. With a few exceptions, any business operating in the construction industry will be classed as a “contractor” under CIS and will need to register.

If you are a freelancer carrying out work for a contractor that is registered with CIS, you will be classed as a “sub-contractor” and will also fall within the rules of CIS. There are a few exceptions to this, for both contractors and sub-contractors. The main exceptions are:

  • Architects and surveyors
  • Scaffolding hire (with no labour)
  • Carpet fitting
  • Material delivery
  • Work on construction sites that is obviously not related to construction, such as catering and facilities management

 

What does CIS mean for contractors and sub-contractors?

A contractor that is registered with CIS must deduct a fixed amount from the payments they make to sub-contractors. The amount they deduct depends on whether the sub-contractor is registered or not:

  • Registered: The contractor deducts 20% from the subcontractor’s payment, and submits it to HMRC.
  • Not registered: 30% deduction
  • Gross Payment Status: 0% deduction

The deduction is paid directly to HMRC and is treated as an advance payment of the subcontractor’s tax and National Insurance Contributions (NIC).

 

Does CIS depend on how I work?

CIS applies to sole traders, partnerships, and limited companies, both as contractors and sub-contractors.

So, if you are in a trade or profession that falls within CIS, and you carry out work for a CIS registered contractor, you are automatically within CIS.

 

How CIS works in practice

 

Verification

Before you carry out work for a contractor, they will need to verify you with HMRC. They’ll need your Unique Taxpayer Reference number (UTR) and NI number if you’re a sole trader or in a partnership, or your company UTR if you’re a limited company.

It’s important to give the contractor the correct information, including the exact trading name you’ve registered with HMRC. If the details are incorrect, you will be classed as unregistered and pay the higher deduction of 30% – ouch!

After they submit the request for verification, HMRC will tell the contractor how much to deduct. You can still carry out work for the contractor without being registered for CIS but will pay 10% more in deductions. So, it pays to register, and can make managing your cash flow easier.

If you do pay the 30% rate, you’ll be able to reclaim any overpaid tax as a rebate once you submit your Self Assessment. So, it also pays to get that in sooner rather than later!

 

Deductions

The contractor submits a return to HMRC once a month and you receive a statement or payslip showing the gross payment and amount that’s been deducted.

This is probably not the amount you will actually owe in tax and NICs as, unlike the PAYE system for employees, the deduction is a flat rate and doesn’t take into account your personal allowance or any other earnings you might receive. The personal allowance is the amount of income you can earn before starting to pay tax on it.

When you fill in your Self Assessment tax return you’ll enter the amount of deductions paid under CIS, and HMRC calculates whether you owe more tax and NIC, or are due a refund.

 

Gross Payment Status under CIS

As a sub-contractor, you can apply for Gross Payment Status if your business passes several tests which are mainly:

  • Your business does construction work in the UK (or provides labour for it)
  • A good track-record of paying tax and NIC on time
  • Turnover of at least £30,000 per year, excluding VAT and cost of materials
  • In the case of partnerships or limited companies, then it’s at least £30,000 turnover for each partner or director, or £100,000 for the whole partnership or company

HMRC will confirm if you have Gross Payment Status, and you will receive payments without deductions. You will then have to show the gross payments on your Self Assessment or company tax return, and pay the appropriate tax and National Insurnace on it.

 

Responsibilities under CIS

It’s important to know who is responsible for what under CIS. Firstly, you need to decide whether you are a contractor or sub-contractor. It sounds obvious, but you can be both! For example, if you are engaged by a contractor to carry out a particular job, then you are acting as a sub-contractor. But if, in order to do the job, you then take on sub-contractors yourself you are now also acting as a contractor.

 

Contractor’s responsibilities

Whilst you can work as a sub-contractor without registering with CIS, you have a legal obligation to register if you act as a contractor.

The contractor must verify the sub-contractor’s status before work commences and then they are responsible for deducting the correct amount, filing a monthly return, and paying the deduction to HMRC. They must also provide a monthly statement or payslip showing pay and deductions.

Contractors must also keep records of all payments and deductions for sub-contractors for at least 3 years, along with various other reporting responsibilities regarding changes in their business.

 

Sub-contractor’s responsibilities

As a sub-contractor, your main responsibility is to provide accurate information for the verification process, and to maintain records of payments received and deductions made. This information will be on the monthly statement or payslip you receive.

Whilst you do not legally have to register for CIS, it makes good sense to register as you’ll pay 10% less in deductions.

It’s also important that you understand that CIS is not a replacement for the Pay as You Earn (PAYE) system for employees. You must account for tax yourself under Self Assessment if you’re self-employed, or a company tax return if you’re a limited company.

 

Accounting for tax as a freelancer under CIS

It’s common to overpay tax under CIS because the deductions don’t take into account your personal tax allowance, or any tax relief that you can claim on allowable expenses .

If you’re owed a refund, the sooner you submit your self-assessment return, the sooner you’ll receive what you are due so it’s worth doing it early. And if that all seems like a headache, why not get a professional to do it for you.

Managing Your Cash Flow as A Freelancer