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.
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!