Do Freelancers Need to Charge VAT?

Do Freelancers Need to Charge VAT?

VAT stands for Value Added Tax. It’s a type of UK consumption tax applied to the value added at each part of the production and sale of goods and services. In simple terms, it’s extra money added on top of the making and selling of things, which the government then collects and reinvests.

The standard VAT rate is 20% and this applies to most qualifying goods and services, although some things like sanitary products, financial services and children’s clothing have reduced (5%) or no (0%) VAT applied.

The end customer is the one that ultimately pays VAT but as you know, even as a business owner, sometimes you’re also the customer.

 

How does VAT work for freelancers?

Here are some key things to know about VAT as a freelancer:

  • VAT works the same for freelancers as it does for any other type of contractor or business owner. Registration is only mandatory once your VAT taxable turnover reaches a certain threshold.
  • You only need to charge VAT as a freelancer if you are VAT-registered
  • Once you are registered for VAT, you will need to start adding VAT to your client’s invoices and submit VAT Returns to HMRC

 

Do all freelancers have to register for VAT?

No, not all freelancers will need to register for VAT. As with all types of business owners, you only need to register for VAT once your VAT taxable turnover (the total amount of sales you make of anything that isn’t exempt from VAT) exceeds the legal threshold.

The VAT threshold is currently set at £90,000. So, if your VAT taxable turnover is over this amount, you will need to register for VAT by law. The registration deadline is within 30 days from the end of the month in which you exceeded the threshold.

As long as your taxable turnover is under this threshold, you won’t need to worry about registering for VAT or charging your clients VAT. However, some people choose to register for VAT voluntarily.
 

Voluntary VAT registration

Unless you only sell goods or services that are VAT-exempt or zero-rated, you can voluntarily register for VAT, even if your taxable turnover is nowhere near the £90,000 threshold yet.

The benefits of registering for VAT voluntarily include:

  • Making savings as you can reclaim VAT on business-related purchases. In some cases these can also be backdated for up to four years prior to your VAT registration date.
  • Making your business appear more established and therefore more credible in your clients’ eyes.
  • Making some types of EU invoicing easier.
  • Eliminating the need for you to do it at a later date when your business will be bigger and you’ll be busier.
  • Mitigating the risk of exceeding the legal VAT registration threshold without realising.

If you fail to register for VAT once it becomes mandatory, you risk being slapped with a financial penalty of between 5-15% of what you owe on top of the outstanding tax. If you think you’re going to pass this point within the next 30 days, it’s time to get VAT-registered, pronto!

Just be aware that:

  • You’ll have more admin to do as you’ll need to account for VAT on your invoices and in your bookkeeping, and submit VAT Returns to HMRC.
  • VAT registration can affect your pricing structure. Because it’s an added charge, you might decide to pass this on to your customers (so the amount they pay is higher), pay it yourself (which will eat into your profits), or a combination of both.

It’s important to note that if you aren’t registered for VAT, you aren’t allowed to charge or claim back any VAT.

Once you’re registered, whether it’s voluntarily or mandatory, you will need to start charging VAT on your goods and services.
 

The different VAT schemes

If and when you do register for VAT as a freelancer, you’ll need to understand the various schemes so you can choose how to charge, claim and report VAT in a way that suits you. These include:

  • Standard VAT accounting scheme
  • VAT Flat Rate Scheme
  • VAT Cash Accounting Scheme
  • VAT Annual Accounting Scheme
  • VAT retail schemes
  • VAT margin schemes

Let’s explore four of the most common schemes to help give you an idea of how each one works.
 

Standard VAT

The Standard VAT scheme is a great option if your cash flow is healthy and you have regular clients who are reliable payers.

Using this scheme, you charge VAT to your customers (output tax) and reclaim VAT on your purchases (input tax). You then pay HMRC the difference between these two amounts as part of your VAT Return, even if your customers haven’t paid you yet.
 

Flat Rate VAT

As the name suggests, this scheme is where you pay a flat rate of VAT to HMRC as a percentage of your turnover, as opposed to calculating the difference between output tax and input tax like you do with the Standard VAT scheme.

Once the flat rate is paid, you get to keep the difference between what you charge your clients in VAT and what you pay HMRC. For some business owners, this scheme is preferable because it’s quicker and easier than calculating specific amounts.

However, with the Flat Rate scheme, you aren’t allowed to reclaim VAT on your purchases. This scheme is good if you want something predictable and standardised or if you don’t typically pay much (or any) VAT on the things your business buys.
 

VAT Cash Accounting

Cash Accounting might make the most sense for you if your freelance clients aren’t regular or if your clients are notoriously bad at paying their invoices on time.

With this scheme, you account for the VAT on sales and purchases when the payment happens, rather than using the date of the invoice. This means you don’t need to pay the VAT you collect from a customer until they actually pay it, but likewise cannot claim the VAT you owe to a supplier until you pay them.
 

VAT Annual Accounting

VAT Annual Accounting is where you make advance payments towards your next VAT bill during the year, either on a monthly or quarterly basis, and then submit an annual return. You can request a refund from HMRC if the advance payments result in an overpayment.

The key thing to consider about the Annual Accounting VAT scheme is that you can only reclaim VAT on an annual basis. So, although it is one of the simpler methods, reclaiming on a yearly basis might not work for you (or your cash flow).
 

How do I add VAT to my freelance costs?

To charge your freelance clients VAT, you’ll need to figure out which VAT rates apply to your goods or services. Once you know this, you can then add this to your original costs on your invoices.

For example, if you charge a freelance client a £500 day rate and want to add VAT at the standard 20% rate, you’ll invoice them £600 in total. This is the £500 day rate plus 20% VAT (£100).

On your invoices, you should detail:

  • The original cost (the price excluding VAT)
  • The VAT rate (% amount) being applied
  • The total (original cost plus VAT)
  • Your VAT number

When discussing your prices with clients or displaying them on your website, make sure to communicate clearly that you charge VAT on top of your standard costs.

Remember to keep excellent records of all your financial transactions, and to record your VAT dealings in detail!
 
Looking for more expert business support? Head over to our info hub for more news and helpful resources.

Can I Freelance While on Maternity Leave?

Can I Freelance While on Maternity Leave?

Whether you’re expecting the pitter-patter of tiny feet or you’ve just brought your new bundle of joy into the world, congratulations!

If you’re in employment and on maternity leave, you will likely be receiving Statutory Maternity Pay (SMP) if you are a qualifying employee.

To qualify, you must:

  • Have been working for your employer for at least 26 weeks by the 15th week prior to your baby’s due date
  • Earn a minimum of £123 per week (pre-tax)
  • Have given notice to your employer at least 28 days before stopping work
  • Have provided proof of the pregnancy (typically this is a MATB1 form you can get from a doctor or midwife)

 

How much is Statutory Maternity Pay?

SMP is given at 90% of your average weekly earnings (pre-tax) for the first 6 weeks of maternity leave and £172.48 per week for the remaining 33 weeks (or still at 90% of your average weekly earnings if it’s less than £172.48).

For some new parents, freelancing while on maternity leave is a way to earn more money to top up SMP payments. Especially given that employees can take up to 52 weeks of maternity leave but SMP will only be paid for the first 39 weeks.

Self-employment allows for more financial freedom and flexibility if you do want to take the full maternity leave period of 52 weeks but can’t afford the additional 13 weeks with no SMP.
 

Can I freelance while on maternity if I’m employed?

If you’re on maternity leave from your job and considering freelancing at the same time, there are some important things to know.

  • The first key thing to be aware of is compulsory maternity leave.

This legally prohibits anyone from doing any kind of work for two weeks after they give birth. You’ll probably want to spend those two weeks cuddling and adjusting anyway but this legal requirement is worth noting.

After that two-week compulsory maternity leave period, you can start freelancing if you like. You should consult your employment contract first to make sure your employer doesn’t prohibit freelancing while working for them (and then decide what you want to do with that knowledge).

Even when you’re on maternity leave, you’re still legally bound by all the rules and regulations in your employment contract, so you will need to continue complying with them.
 

Will freelancing affect maternity benefits?

If there’s no clause in your employment contract and you’re permitted to freelance while on maternity leave from your job, your Statutory Maternity Pay shouldn’t be affected.

In this case, self-employment won’t stand in the way of your SMP and you will still receive these payments along with any earnings you make through freelance work.

For the sake of clarity, it’s important to note that if you carry out any work for your employer while you’re on official maternity leave, this will stop your Statutory Maternity Pay. This includes working for your employer on a ‘freelance’ basis for the period of time you’re on maternity leave.

Some new parents think this is a crafty loophole to earn more without having to find or service new clients but this is extremely risky. If you were to be found out, you could lose your maternity benefits, have to pay extra tax to HMRC, and end up out of pocket.
 

Maternity Allowance and KIT days

Unlike employed people, self-employed freelancers are not entitled to the regular SMP but they can apply for a Maternity Allowance (MA) instead although you can’t have both at the same time.

Even if you start freelancing while on maternity leave, if you’re already getting Statutory Maternity Pay through your employer, you can’t also have the Maternity Allowance.

With the Maternity Allowance, it’s also important to be aware of ‘Keeping in Touch’ (KIT) days. These days allow you to work for a maximum period of 10 days within the time you’re receiving MA and no more. If you work beyond the 10-day threshold, you will lose your entitlement to MA.
 

Do I have to pay tax on my freelance earnings?

When you’re juggling a new baby and freelance work, you’re certainly going to have a lot on your plate. It’s essential that you still make time to track your income and register for Self Assessment once you go over the tax-free trading allowance.

The trading allowance is the amount of income you can make in a tax year from casual and/or miscellaneous means before starting to pay tax on those earnings. The current threshold is set at a maximum of £1,000 per tax year, and doesn’t apply to the wages you get from your employer.

So, if you make more than £1,000 through your freelance work in a tax year, you’ll need to submit a Self Assessment tax return and pay tax on the earnings over the trading allowance threshold.

You will still be taxed as normal for your employment earnings through your employer’s payroll system. Registering for Self Assessment just means you can pay tax on the extra you make through self-employment.

And no, your employer won’t know unless you tell them, or unless you ask HMRC to collect any tax you owe through your tax code.
 

Track earnings and expenses with good bookkeeping software

The best way to keep track of your freelance earnings and expenses is by using bookkeeping software. This means you can access your accounts from anywhere with an internet connection and track things like spending and invoices on the go.

If you do start earning more than the trading allowance, bookkeeping software makes it far simpler to figure out how much of your income will then be taxable.

If you hire an accountant to do your Self Assessment tax return for you, bookkeeping software also makes providing them with all the information they need much easier.

Plus, with good bookkeeping practices, an accountant will also be able to help you freelance as tax-efficiently as possible and claim as much tax relief as you can.
 
Find even more advice and guidance for freelancers in our info hub!

How to Master your Personal Brand as a Freelancer

How to Master your Personal Brand as a Freelancer

All too often the word ‘brand’ is only associated with big, established companies or particular types of businesses and industries, when branding is an essential key to success no matter how big (or small) your business is.

We explore why even as a solo-flying freelancer, it’s important to build and maintain a strong personal brand.

 

What is a personal brand?

Your personal brand is essentially your business’s personality and identity. It’s rather like the way you choose what to wear, speak, and conduct yourself in order to convey a particular image to the world.

Much like with regular business branding, a personal brand is the culmination of your unique selling point (USP), your values, and your position in your market.

It’s all about constructing and communicating how you want to be perceived by your customers, competitors, and business partners.

 

Why is having a personal brand important for my freelance business?

You can start and run a freelance business without first establishing a personal brand, but there are a whole host of ways in which personal branding can boost your success. As a freelancer, you are the business, which is why perfecting your personal brand is so important.

According to a report published by LinkedIn on the value of personal brands, 70% of hiring managers agreed that a solid personal brand is more critical than any CV.

 

Passive promotion

As a freelancer, you don’t have the luxury of a dedicated sales and marketing team working away in the background to drum up business.

While you’re servicing clients and doing all the other things freelancers do, your personal brand can act as a way to promote your business through things like your website, social media platforms and ads.

In other words, your brand can speak for you about who you are, what you do, and who you work with – at least until you’re available to elaborate in conversation.

 

A competitive edge

Your personal brand is what is going to help you stand out from the crowd in your competitive landscape.

Even if you offer exactly the same services as somebody else for pretty much the same prices, your brand can be the deciding factor for a new customer choosing you over them.

If you have a strong, memorable brand that resonates with the customer, but your competitor doesn’t, the customer will more than likely spend their cash with you.

That’s why, when building your personal brand, it’s essential to check out your competition. Figure out what you do and don’t like about their brand and then use that to gauge how you can differentiate yourself.

 

Reaching the right people

A strategic and well-executed personal brand will ensure you’re reaching the right customers and making the desired connections.

For example, if you’re an alternative wedding photographer who specialises in a quirky aesthetic, your branding will tell couples looking for a photographer if they’re in the right place or not.

Your personal brand will also help ensure that you’re working with the right business partners and investors for you.

Plus, if you ever get to a point where you need to hire employees, your personal brand will help you connect with the right kinds of people in that sense too.

 

A stronger reputation

A personal brand will make you more recognisable and memorable and according to the same LinkedIn study, 92% of customers have a desire for relatability when it comes to the brands they align with.

A strong personal brand will also boost your reputation and credibility. People can be guilty of thinking that you’re ‘just a freelancer’ but a clear and consistent brand can enhance how professional and trustworthy you are perceived to be.

 

How do you build a personal brand?

A key thing to remember when building your personal brand is that it needs to be something that can be translated into lots of different formats. This includes digital, print, moving image, static image, small business cards, large posters, written word, scripts – the list goes on.

Where branding is concerned, consistency really is key.

Another super important thing to realise is that branding goes way beyond the name of your business and the colours in your logo.

Sure, those things matter but for a personal brand to be built on solid foundations, you also need to go deeper and consider things like your goals and your business mission too. This will help you tell your full story and produce the authenticity and relatability that customers are looking for these days.

 

What components do I need to build a personal brand?

Below are the most significant pieces of the personal brand puzzle that you’ll need to consider.

 

Your USP

What makes you different from everybody else in your industry, and why? This is the first question you need to answer before crafting your personal brand. The answer will help everything else fall into place.

Find the reason(s) that somebody should choose you over any of your competitors and then devise a way to reflect this in how you portray your business to the world.

 

Brand values

Brand values are guiding principles that influence everything else you do, from how you communicate to customers and how you present in public speaking, to the quality of service you provide and your marketing approach.

Think of them as your core beliefs and refine them into three or four pillars. You can share these in your brand guidelines, but you could also consider communicating them publicly as part of your pitch for work, or on a website.

Examples of brand values from some big names you might recognise:

  • Nike: Empowerment, performance, and inspiration.
  • Patagonia: Environmental responsibility, sustainability, and social justice.
  • Coca-Cola: Happiness, optimism, and shared experiences.
  • Apple: Innovation, simplicity, and elegance.

 

A consistent tone of voice (TOV)

A brand tone of voice describes the way in which you communicate, whether it’s written, spoken, or copy-led visuals. Your TOV encompasses:

  • Language (the words you choose)
  • Communication style
  • Emotional tone

Below are some examples of brand TOVs that demonstrate how voice and tone can differ depending on the business and its product, values, market position, etc.

  • Nike – The way Nike communicates is inspirational, motivational, and empowering. You’ll notice it uses short, punchy sentences to encourage action.
  • IKEA – IKEA’s language is always simple, straightforward, and practical. This is to reflect its mission to make life as simple and helpful as possible through easy-to-build, everyday products.
  • Mailchimp – Mailchimp uses laidback language with a casual tone and hints of humour, which helps the brand make complex marketing tools feel more accessible and user-friendly.

 

A clear visual identity

As well as what your brand stands for (your values) and sounds like (your tone of voice), it’s also important to consider how it looks. This is known as your personal brand’s visual identity and includes things like your logo, your colour palette, the type of imagery you use, etc.

Just like your TOV, you need to ensure that your visual identity is clear and consistent whenever you’re communicating with customers so that your brand is recognisable and familiar.

 

Do I need to hire a professional brand expert?

No, you absolutely don’t need to hire a professional to build a personal brand. If you’ve got the skills and the desire to do it yourself, go for it. But if you do have the budget then getting an expert to help could boost things to a whole new level.

Either way, the great thing about building a personal brand is that you’re in full control and you can exercise complete artistic license.
 
Head over to our freelancer information hub for more guides, news and advice.

Why Your Freelance Business Could Benefit From Collaborating With Other Freelancers

Why Your Freelance Business Could Benefit From Collaborating With Other Freelancers

Collaborate with the competition? Fraternise with the enemy more like. That’s what you might be thinking about the suggestion of working with other freelancers, so we’re here to open your mind to the potential pros of doing so.

Being your own boss as a freelancer doesn’t mean you have to go it alone all the time. Joining forces with other like-minded professionals has the potential to boost your income, expand your connections and open new doors for your business.
 

Reasons to collaborate with other freelancers

Although being a freelancer is innately solitary, sometimes strength really does come in numbers. Below are some of the key benefits you could take advantage of when teaming up with fellow freelancers.
 

Taking on bigger projects

You want to take on a project but it’s just not feasible with the time you have available. There are only so many hours in the day, but that doesn’t mean you have to bypass opportunities.

Rather than miss out on the work and client connection entirely, you could split the project with another freelancer in your field. That way, you still generate some income, and you get to add the client and finished project to your portfolio.

By collaborating with other freelancers, you could also start taking on projects with a wider scope that call for other skill sets or specialisms alongside your own to deliver the brief.

If you work in digital content creation but specialise in video, for example, you could collaborate with a copywriter who can write scripts and campaign copy, and a graphic designer for static imagery. That way, you could offer clients a more comprehensive, full-spec service.

When you choose who you collaborate with, you get to keep more control of the project and give the client a smoother experience.
 

Strengthening your own business

Collaborating with other freelancers doesn’t always have to mean servicing clients together. You could also enlist the expertise of a freelancer if you require their services to improve your own business in some way.

If you make and sell pottery online, for example, you might want to collaborate with a freelance photographer to help showcase your products in the most polished way possible.

You might even consider looking for a freelance assistant if you’re schedule starts to get particularly hectic.
 

Making new connections

Not only does making new connections expand your reach, but it also provides you with a network of people you can trust and call on if you need client cover.

If you’re a wedding photographer who is unavailable on a specific date, for example, you can draft in another freelance wedding photographer as a subcontractor or a replacement. That way, the client still has a positive experience of your service.

This works the other way around too; if a freelancer can’t take on a job, they can call you to take it instead.
 

Learning new skills

If you collaborate with a freelancer who does the same thing as you, you have an opportunity to develop your skills and deepen your knowledge. They may be able to show you some tricks of the trade you didn’t know! It’s experience you might otherwise miss out on without having colleagues or a team around you.

Even if their freelance discipline is very different, it’s still an excellent opportunity to learn more about their industry and how it works in practice.
 

Unlocking new ideas

When flying solo as a freelancer, it’s easy to get comfortable in an echo chamber of your own thoughts and stuck in your tried-and-tested ways of working.

Collaborating with others is a great way to experience new ideas, fresh perspectives and different ways of doing things. Opening your eyes and mind to this is often the best way to take your business to new heights.
 

Helping to combat loneliness

Freelancing can get pretty lonely at times, especially if you tend to work from home a lot.

Collaborating with other freelancers, whether in a co-working space or on-site with a client, can burst the solo bubble for a while, which can have a positive impact on your wellbeing and productivity.
 

Things to consider when working with other freelancers

Hopefully we’ve managed to convince you that there are many benefits to collaborating with other freelancers. Below are some important things to consider helping you ensure any co-working relationship runs smoothly and in the best interest of your business.
 

Contractual agreements

When working with other freelancers, it’s advisable to each sign a contract to protect your work, your Intellectual Property (IP) and your confidential information – and to prevent your clients from being poached.

Ideally, you’ll only ever collaborate with people you trust, but it still can’t hurt to take protective precautionary measures.
 

Transparent communication with clients

You don’t have to tell your clients all the ins and outs of your working relationships but there might come a point when it would be considerate to let a client know if there is someone else involved in a project of theirs – if they aren’t already aware. Client communications are important!

Common courtesy is one reason but there may also be legal reasons why the client should know. If they’re working on a project that hasn’t been launched yet, they may require everybody involved to sign a non-disclosure agreement (NDA).
 

Be selective about who you collaborate with

Even when you collaborate with somebody on a project or piece of work, you’re still putting your name to it. This means you need to make sure any freelancer you team up with is going to uphold the standards you want clients to associate you with.

Who you work with can have a positive or negative impact on your reputation as a freelancer in your industry. The onus is on you to ensure you’ve done sufficient background research before embarking on any kind of collaborative working relationship!
 
Head over to our freelancer information hub for more guides, tips, and advice.

How to Use Email Marketing to Grow your Freelance Business

How to Use Email Marketing to Grow your Freelance Business

Email marketing is a popular form of digital marketing that involves sending promotional email communications to people on your mailing list. These could be existing clients, or connections who aren’t customers yet but have subscribed to your email comms via your website or some other means of data capture.

Email marketing is a heavyweight when it comes to marketing, with its revenue expected to grow by 287% between 2024 and 2032, according to a study by popular email marketing platform, Mailchimp.

Sent straight to the reader’s inbox, it’s a direct way to engage with them – as long as they open the email in the first place!

 

What are the benefits of email marketing for freelancers?

You might be thinking that it sounds like something more suited to big businesses with thousands of customers and long mailing lists, but email marketing is an invaluable tool freelancers can use for all sorts of reasons:

  • Helping you find the right clients and build real connections with people who are genuinely interested in what you have to say and offer
  • Working at all stages of the marketing funnel, from brand awareness to lead conversion, email marketing is a versatile and effective way to reach out to people wherever they are on their journey with you
  • Automating tasks like client onboarding, follow-ups with leads, project progress updates, milestone reminders, post-project feedback gathering and testimonial requests
  • It’s a relatively inexpensive form of digital marketing, and the ROI for email marketing has the potential to be as high as 4400%, which means the money, time and energy you spend on it could be seriously well-invested
  • Boosts customer retention by keeping you on their radar

 

How do I build and grow an email list?

Building and growing an email list requires strategy and patience. Sending inconsistent communications or too many blanket messages won’t nurture an engaged group of subscribers!

So, whether you’re starting from scratch or building on what you’ve already got, here are key steps to help you set your email marketing efforts up for success.

 

Set clear goals

The first thing you need to do is consider your goals and set yourself some clear objectives. What is it you want to get out of your email marketing? More clients? Better client retention? More brand awareness?

A clear understanding of your goals will lead the way and help you come up with a strategy that will support the growth of your business.

 

Define and segment your target audience

Different people on your mailing list will require different kinds of communication. An existing customer will receive different emails from non-customers you’re trying to convert.

Segment your audience as specifically as you like and plan your email marketing content plan around those target groups.

 

Find the right email service provider for you

An email service provider will allow you to upload all your contacts and do everything in one place, from segmenting recipients and designing emails to monitoring the success of your campaigns and everything in between.

Mailchimp, HubSpot and Omnisend are popular email platforms, so do your own research to make sure you’re choosing a provider that has all the features you need within your particular budget.

 

Entice people to join your email list

In order for email marketing to deliver, you need people on your mailing list to actually get eyes on your emails.

Some effective ways to incentivise people to sign up for email communications from you include:

  • A gated lead magnet, such as a guide, report or eBook, that people have to share their email address with you to receive
  • Offering a discount if somebody signs up for your mailing list

 

Create email flows

Instead of just sending one solitary email, set up email flows (AKA email sequences or drip campaigns) with multiple emails in. This way, the recipient is fed a number of emails over a set period of time to keep them engaged.

Just be sure not to send too many emails too often or this could be considered spamming (and pretty annoying) and lead people to unsubscribe from your communications.

 

Keep it as personal as possible

The more personal a piece of communication feels, the more likely somebody is to engage with and remember it.

  • Use the recipient’s first name or business name. This is usually super simple to do if you choose an email service provider that has dynamic text options
  • Send automated emails on client’s birthdays or other special occasions
  • Segment your recipients and share content and information with them that is directly relevant to their specific niche or industry

 

Start a newsletter

A newsletter is an effective way to send the same email to your whole mailing list, without needing to segment audiences or create multiple versions of targeted content. Plus, it helps people get to know you and your business better to build trust and awareness.

The great thing about being a freelancer is that you don’t need to worry about racking up hundreds or thousands of email recipients in the same way a big ecommerce business would, for example.

As long as you have a decent number of engaged recipients, you should start to see some positive results.

 

How often should I send emails and when?

There really is no definitive answer to the question of how many times you should email your customers. Too often and too little both risk negative effects, so it’s a tricky one. The marketing world changes all the time and patterns in how customers consume content shift constantly.

According to research by Mailerlite, Thursdays and Mondays yield the best open rates, while 11am – 12pm, 6 – 7pm, and 2am are the most promising times for email engagement.

The most important thing to do is analyse how your readers are responding to your email communications and adapt according to that. If you don’t see any positive engagement, it might be time to reduce the frequency of your contact or reconsider your sending times.

 

Measuring the success of email campaigns

Getting to grips with when and how often to send emails isn’t the only reason you should be measuring the success of your email comms. It will also help you figure out if you’re sending the right kinds of content to the right audiences and give you a steer on the kind of length, tone and format your recipients like most.

For example, if your open rates aren’t great, you could try testing a few different types of email subject lines. Or, if your click rates are poor, you might need to rethink how engaging your call-to-actions are.

It’s all about trial and error and finding out what works for your target audience.

 
Head over to our freelancer information hub for more guides, news and advice.

What’s the Best Business Bank Account for Freelancers in the UK?

What’s the Best Business Bank Account for Freelancers in the UK?

Freelancing is great for so many reasons. It gives you full autonomy to run your business how you see fit, lets you show off your creative flare without anything holding you back, and gives you the power to decide how much, or how little, you want to work. But as a freelancer you still have rules you must comply with – we’re talking about all things tax!

For some freelancers, putting their business’s finances through a business bank account is a legal obligation, but for others, it isn’t (although it could be in your business’s best interest regardless).

In this blog we’ll take a look at the best business bank accounts for freelancers.

 

Do freelancers need a business bank account?

The answer depends on your business structure. If you’re freelancing as a sole trader, you’re free to do so using your own personal bank account. A freelancer who’s registered as a limited company though, is legally required to have a business bank account.

This is because sole traders technically are the business, HMRC doesn’t differentiate between the two and they can keep all their profits after tax.

A limited company is a separate entity to you as a person – so you’ll need a business bank account to separate your business’s finances from your own.

 

Why would a business bank account be beneficial for my freelance business?

Many freelancers won’t legally be required to own a business bank account – but that doesn’t mean it wouldn’t be beneficial to use one.

There are many benefits of having a business bank, for example:

  • It’s easier to track your business expenses (for example, let’s say you want to claim for fuel you’ve used on a business trip – you don’t want to either forget about the transaction, or claim the wrong costs for fuel you spent that week out with the family).
  • It can boost your credibility with suppliers and clients
  • You’d be protecting your business’s credit score (because it won’t be associated with any personal credit)
  • Opening a business bank account gives you more freedom financially because personal accounts often come with higher restrictions on withdrawals and transfers

We have more reasons over on our blog, do freelancers need a separate bank account.

 

What should freelancers look for when comparing banks?

While we don’t want to overwhelm you, there are quite a few things you need to consider when shopping for a business bank account! We’ve narrowed it down to the most important things to look at, so if you find something that ticks all of these boxes, you know you’re on to a winner.

 

What are the fees like?

It’s important to look for an account with no (or low) monthly fees. It can also help if they charge low:

  • Transaction fees
  • Foreign exchange fees
  • Withdrawal fees

Always check out the terms and conditions, as some banks may even waiver fees if you maintain a minimum balance.

 

Do you have access to credit?

Even if you don’t plan on using credit, it’s always good to have there as a buffer. Look for accounts that offer credit cards and overdrafts – just in case an unexpected business expense comes from nowhere (it does happen!).

 

Do they offer international capabilities?

If you work with clients overseas, you’ll need to consider accounts that offer multi-currency facilities, international wire transfers and foreign exchange services. Even if you currently don’t have clients overseas – this is definitely worth considering if it’s a goal you have for the future!

 

Are the payments secure?

Secure and convenient payment processing is a must – think online payment gateways and mobile payment apps. It’s also a bonus if you find a bank that offers things such as payment reminders and tracking features.

 

Can you speak to someone easily when facing any issues?

We don’t mean to scare you, but things go wrong from time-to-time. When it comes to your money, you need to be assured that you’ll be able to speak to someone who can fix your issue ASAP. On top of that, ensure the banking features are easy to use, and the customer service reps are accessible.

 

Do they integrate with the accounting software you use?

We saved this one until last, but it’s super important. Integrating with accounting software helps automate your financial record-keeping, which means you can complete your tax returns much easier, and have one very happy accountant! Software such as Pandle integrates with most banks.

 

Best business bank account for freelancers

There are so many to choose from, depending on your industry and the needs of your business, but here are some honourable mentions to start you on your journey!
 

Provider Features Fees
Monzo Monzo are pretty big on social media, and their popularity is growing amongst the freelance community.

Features include:

  • Integrates with Xero, QuickBooks, FreeAgent and Pandle
  • You can make payments in over 40 currencies
  • FSCS protected
  • Multiuser access
  • Invoicing
  • 24/7 support
 £0 – £5 per month

If you do go with the free version, you won’t be able to integrate with any accounting software.

You can access their ‘pro’ version for just £5 per month. Great value for freelancers who have just started out!
Starling Starling has some great features worth looking at, which include:

  • 24/7 customer support
  • No monthly or transaction fees
  • Integrates with Xero, QuickBooks, FreeAgent and Pandle
  • You’ll be able to apply for overdrafts and loans
 £0 – £7 per month.

This depends on the needs of your business; you can opt for the ‘Business Toolkit’ for £7 per month. Having access to these features means you can do things like run HMRC tax calculations and reports, submit VAT returns etc. If you don’t have accounting software this can be beneficial!
Mettle Mettle is owned by NatWest, which is worth a mention if you’re nervous choosing a business bank account!

Features include:

  • FSCS protected
  • You can use FreeAgent for free (as it’s NatWest owned) but if you did want to integrate with Pandle or QuickBooks for example, you can!
  • You can earn interest on savings
 No monthly frees and FreeAgent is provided completely free.
Tide This is a great one if you’re registering a limited company with Companies House (it’s usually £50 but Tide will do it for you for £14.99).

Other features include:

  • 24/7 support
  • Integrates with Xero, QuickBooks, FreeAgent and Pandle
  • Upload receipts and match them with transactions
  • FSCS protected
  • Can register your business with Companies House
 £0 – £49.99 per month

(The pro version is £18.99 per month + VAT)

 

What is FSCS protection?

You probably noticed in the features column we’ve listed FSCS protection. This stands for financial services compensation scheme. Basically, if the bank fails, you’re covered up to £85,000!

We know this is a tough decision to make, so we’d recommend speaking with an accountant for more advice. You’ve got this.

Find even more advice and guidance for freelancers in our info hub!

Can Freelancers Claim Mileage?

Can Freelancers Claim Mileage?

As a freelancer there might be times when you need to travel for work. If you use your own vehicle to make the journey, you can claim the cost of your trip against your tax bill as an allowable business expense.

In this article we’ll go over what you can claim for, and how to work out your mileage expenses.

 

How much is the mileage allowance for freelancers?

Freelance sole traders can claim a mileage allowance based on what type of vehicle they use for the journey. Travel in your own car or van, for example, and you can claim 45p per mile for the first 10,000 miles of business-related travel you do during the tax year, and then 25p per mile for the rest of the tax year.

The flat rate for mileage is set by the government:

  • Cars and vans: 45p for the first 10,000 miles and then 25p for any miles beyond that
  • Electric cars and vans: 45p for any number of miles
  • Motorcycles: 24p for any number of miles
  • Bikes: 20p for any number of miles

It’s also worth noting that if you employ anybody under your own company and you’re travelling with them, you can add on an additional 5p per mile, per passenger.

This method of claiming the mileage allowance is also known as the flat rate or simplified expenses method, because it’s designed to make it easier for freelancers to work out their claim – but you can’t use simplified expenses if:

  • You’re a company director travelling on company business (instead, your company will reimburse you for the expense using the mileage rates, and then claim the cost of repaying you on its Company Tax Return)
  • You’re using a vehicle designed for commercial use, like a taxi or a dual control driving instructor car.
  • You’ve already claimed capital allowances for the vehicle or included it as an expense

So, what happens if you’re not eligible to claim your mileage using simplified expenses, or your costs are higher than the flat rate would allow you to get back? There is another option available to you.

 

Claiming your actual vehicle expenses

The direct cost (also known as actual expenses) method allows you to claim the exact cost of using your own vehicle for business travel. It can be useful if you’re not able to use simplified expenses, or if the flat rate amount isn’t enough to cover the cost of your trip.

This method requires you to be far more specific because you will need to calculate, as a percentage, how much of your motoring costs were directly related to business purposes.

Once you know this percentage, you can then claim that portion of all motoring and vehicle costs incurred, which can help save you more money than if you were to just apply flat mileage rates.

Actual expensing also calls for more meticulous bookkeeping and accounting because you will need to keep a record of things like fuel receipts, vehicle repairs, servicing, breakdown cover, parking, etc.

 

What trips can I claim travel expenses for?

You can claim the mileage allowance (or your actual costs) for journeys where you’re:

  • Travelling from one work location to another (e.g. office to office, project site to project site, etc.)
  • Travelling from a temporary business-related location such as a client’s premises or an event venue. This has to be somewhere you spend less than 40% of your time or somewhere you don’t expect to visit for more than 24 months to qualify as ‘temporary’.

The main thing to remember is that you can only claim allowances for trips or vehicle usage that is 100%, exclusively for business-related purposes. Anything personal-related will need to be discounted from your allowable expenses.

There are some scenarios in which mileage allowance won’t be applicable, and you won’t be able to claim any compensation for this type of journey, whether that’s the full journey or part of a longer journey. We’ll give you a few examples below.
 
Example scenario 1

You are asked to travel 30 miles to attend a meeting at a client’s office. In this case, you can claim mileage allowance on the whole journey (all 30 miles) because it was exclusively for business purposes.
 
Example scenario 2

You are asked to travel 30 miles to attend a meeting at a client’s office. However, on the way, you decide to take a 5-mile detour to run some personal errands while you’re on the road.

In this case, you can claim for the 30 miles required for business-related travel but the 5 miles at the start of the journey will need to be discounted.

You travelled 35 miles, but only 30 were for business, so the mileage allowance will only apply to this portion of the trip.
 
Example scenario 3

You decide to drive to The Lake District to spend a bank holiday weekend exploring. You cannot claim any mileage allowance for this trip because no portion of the journey is business-related. These are all personal miles.

 

How to record and claim mileage allowance

You should record the start and end point of every journey, the date on which it took place, and what method of travel you used. It’s up to you how you keep these records, as long as they’re complete, accurate, and clear!

There are different types of mileage tracking software and apps which might help, and some bookkeeping apps even include mileage tracking features – such as Pandle and QuickBooks.

You can then claim your mileage expenses through your Self Assessment tax return, along with any other costs, by deducting your claim from the total income you make, so you only pay tax on the profits left over.

Even if you only travel occasionally for business purposes, it’s still worth calculating, recording and claiming mileage allowance because every little helps towards keeping your tax bill down.

 
Find even more advice and guidance for freelancers in our info hub!

National Freelancers Day 2024

National Freelancers Day 2024

National Freelancers Day is coming up, which is super exciting. Whether you’re completely new to the world of freelance, or you’ve been a freelancer for as long as you can remember, this day is to celebrate your hard work and allow you to network with likeminded people.
 

When is National Freelancers Day 2024?

National Freelancers Day is Thursday 20th June 2024 – the first day of the summer solstice!
 

What events are on for National Freelancers Day?

Although National Freelance Day is on the 20th, there’s events going on all week, both in-person and online. Have a look at the National Freelancers Day website to see what’s happening in your area.
 

How do I become a Freelancer?

Starting out as a freelancer is daunting – we know! But we’re here to help with guides and tips. Check out our guides on how to become a freelancer. We go into things like how to pay yourself, how to manage your expenses and the best apps you need to be on to excel in your freelancing career.

We also have self-employment advice that goes into the boring (but very necessary) topic of registering with HMRC, finding and accountant, and paying taxes and National Insurance.
 
Head over to our freelancer information hub for more guides, news and advice.

A Beginner’s Guide to Bookkeeping Software for Freelancers

A Beginner’s Guide to Bookkeeping Software for Freelancers

Bookkeeping isn’t just a necessity reserved only for owners of big businesses, and it’s equally as essential for small businesses, sole traders and freelancers too.

This process deals with how you record and manage what money is coming into the business (income) and what is going out of it (expenditure). Keeping an eye on this flow of cash (literally known as your cash flow!) is what will help you stay financially healthy, and hopefully improve your chances of making a profit.

With so many different types of bookkeeping software available for freelancers to choose from, we thought we’d take a look at why record-keeping is so important, and what software can do to help.

 

How can bookkeeping software help freelancers?

There are lots of reasons why freelancers should spend time making sure their bookkeeping is up to date and accurate, but this can be time-consuming. Accounting software can often help freelancers by processing data automatically, rather than relying on entering everything manually. Let’s look at some of the most common advantages of using bookkeeping software below.

 

Better budgeting and business decisions

Your financial accounts tell the real story of how well your freelancing is going. For example, it might seem like you have lots of money coming in, but if you’re also spending a lot on office space or coworking desks, things might not be as healthy as they seem.

Good record-keeping helps you manage your budget, and make more well-informed decisions about your spending. It’s also a great way to hold yourself accountable for setting money aside to pay your tax bill!

Lots of accounts software will include reporting tools, so you can look at your bookkeeping data in a way that’s easier to digest, rather than a wall of numbers.

 

Are your customers paying you on time?

As a freelancer, one of your biggest challenges can be battling late-paying clients. Following up can be time-consuming (and frustrating) so some bookkeeping software includes automated reminders.

You can usually set contact intervals and personalise the message, leaving the software to fire out an email reminder until the invoice is marked as paid.

 

Are you paying the right amount of tax?

Paying too much tax will leave you unnecessarily out of pocket, while underpaying runs the risk of fines on top of the tax bill you still need to pay – neither of which are ideal! Your bookkeeping records are the foundation of everything you tell HMRC about your business, so accuracy is key.

If you decide to use bookkeeping software, you can usually connect it to your bank account and pull information straight into your records. It tends to mean there’s a lower risk of errors or missing anything.

 

Helps make sure you’re getting as much tax relief as possible

And on the subject of accuracy, good bookkeeping habits also help you record and claim allowable business expenses which will reduce your tax bill.

If you declare income that hasn’t had expenses deducted from it, you’ll end up paying more tax than you should. So don’t!

Using cloud-based bookkeeping software means you can access your accounts from anywhere with an internet connection. This means you can upload receipts as you go, rather than saving and compiling random scraps of paper everywhere.

You can even track your mileage, upload photos of receipts and manage invoices.

 

You can spot a potential problem before it arises

Bookkeeping records can be compared over time, making it easier to spot trends and patterns over time – or even potential problems as they develop. A good accounting app will include reporting functions which make this easier.

For example, if you can see your cash flow moving into a situation that isn’t so healthy, you can quickly and easily ascertain where you’re overspending and where you need to cut costs for a while to get back on the straight and narrow.

 

Do I need to hire a bookkeeper for my freelance business?

No, it isn’t a legal requirement to hire a professional bookkeeper or accountant, and lots of freelancers take care of everything by themselves – but there are advantages to outsourcing your accounts to someone else.

 

Freeing up your time

As a business owner, time is a hot commodity. You really start to understand the true meaning of “there aren’t enough hours in the day”. Outsourcing your accounts to a professional buys you back more invaluable time to spend working with clients, sourcing new work, and building your freelance business.

 

Maximum tax efficiency

While you’re busy growing your empire, a bookkeeper or accountant will help you spot ways to be more tax-savvy. You’re more likely to capture (and claim) your allowable expenses, as well as take advantage of things like tax relief and allowances.

 

Better planning for the future

Having a professional in your corner will allow you to evaluate your financial records more effectively and accurately. This, in turn, will help you make more informed decisions about the direction of your freelance business.

 

How do I choose accounting software?

To make sure you’re reaping all of these benefits, the most important thing to do is find a bookkeeping software that works for you.

Do some research, read reviews and even take a few free trials to get a feel for the kinds of features and user interface you want.

If you do sign up for any free trials, don’t forget to cancel the ones you don’t want or else they’ll end up being recorded in your accounts as an outgoing expense and wasting your hard-earned money.

 

How often do I need to review my bookkeeping as a freelancer?

How often you do your bookkeeping, if you’re doing it yourself, is mostly down to personal preference and how busy your schedule is, although the general rule is to do it as often as possible!

Again, going back to bookkeeping software, automated tools and feeds will help you keep your records closer to real-time without having to do quite so much manual intervention.

The choice is yours but the more meticulous you are with your routine, the easier the whole bookkeeping and accounting process will be.

 
Head over to our freelancer information hub for more guides, tips, and advice.

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