Questions for Self-Employed / Freelancers

Hello,

I know there’s a handful of self-employed / freelancers on the site and I just wondered if I could ask a couple of specific questions with regards to it. I’m in the process of setting up a part-time sideline as a freelance copywriter which, if it goes well, I’m hoping I might be able to end up taking full-time.

I’ve done a lot of reading around it and am aware of the potential benefits and pitfalls of going freelance and self-employed. However, the bits I’m struggling to find answers for and I’m hoping to find a little guidance on are:

  1. Do I need to specifically register as self-employed with HMRC? If so, can I register under my name or do I need to be ‘he_2 trading as he_2 writes’?

  2. Do you have a separate bank account for your business expenses and income and if so, do you have a specific business bank account or just a normal current account?

  3. I know the threshold to be VAT registered is at around £85k but are there benefits / drawbacks to being VAT registered if your income is significantly below that?

Thanks, all, in advance.

The main benefit is that you’d be able to recover input VAT on purchases you’ve made, so you’ll know yourself whether you’re buying enough stuff and paying VAT on it to make that worthwhile. Depending on the area you’re working in/type of customer you have, they may want to deal with other VAT-registered businesses too, but (with the caveat that I don’t know a lot about freelance copywriting) I suspect that might not be an issue for your situation.

The drawbacks are that you’ll need to charge VAT where applicable on services/products (so your price goes up, but it may be that you’re being paid by other VAT-registered companies anyway, so they can reclaim it in turn). You’d also need to file VAT returns.

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  • Do I need to specifically register as self-employed with HMRC? If so, can I register under my name or do I need to be ‘he_2 trading as he_2 writes’?

Yeah, you set up as what’s called a sole trader. You can either trade as your own name or a business name, you just need to ensure you include both on official paperwork like invoices.

  • Do you have a separate bank account for your business expenses and income and if so, do you have a specific business bank account or just a normal current account?

You can do it through an extra personal account or business account, though generally business accounts incur fees. I wouldn’t do it all through your own single personal account. It’s very handy to have a separate one so you can see exactly what’s going in and out, and also buy stuff like office supplies, tech etc through this. At the point where you get an accountant this is going to be a lot easier for them to run through.

  • I know the threshold to be VAT registered is at around £85k but are there benefits / drawbacks to being VAT registered if your income is significantly below that?

SenorDingDong answered this one – I wouldn’t worry about it until you hit the threshold.

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Hi, fellow freelance copywriter here.

You can register as a sole trader with HMRC without having to register as a limited company. I guess it could be beneficial having a limited liability company on the rare chance of litigation, but most of my work comes via agencies that then contract it out to freelance writers, so as far as I’m aware they’re the ones who are liable. The sort of work I get doesn’t really put me in a position to get sued or make massive mistakes.

I just have a single bank account for everything, for me it just keeps things simple when it comes to sending in my return. All of my income is from work, so there isn’t much point in me having a separate account.

As a freelance copywriter I don’t have any need for VAT registration really. I could probably claim expenses for broadband or purchasing a laptop every couple of years, but I can’t really be arsed. My living situation at the moment means the broadband is shared so I’d sooner avoid the hassle of being audited or whatever.

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I think it’s worth having a separate account with a separate card. I’d just put all business spends on that card then give my accountant all my bank statements when he did my tax return, rather than wading through receipts.

Oh, and it was a business account. I can’t remember the price - but it’s not that expensive.

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I don’t have a separate bank account because its my sole income and its so easy to follow (invoice in, that’s me done basically as my business doesn’t have any purchase needs except an Office 365 sub which comes out of the same account) - if you have multiple income streams of a complex invoicing/expenses flow then I would say go separate

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I would highly recommend putting ~20% of invoices straight into another account if you can. The biannual oh-shit-where-am-i-gonna-find-my-tax game is no fun

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So if I remember correctly, at the end of your first year trading you have to pay all the tax from that year plus 50% deposit on the coming year. That was not fun, and I had to go on a payment plan plus got a bunch of fines. Definitely get into the habit of putting money aside - I use Premium Bonds for this.

I registered as a sole trader in 2014, although everyone else I know set up their own limited company, and I think this is the advice that financial advisors are giving out (I could be wrong there). I’m pretty sure sole trader is the correct description of how I operate, and most the people setting up as ltd companies are doing so purely to pay less tax (either by bending the rules or flagrantly breaking them).

I have had issues though - for example the latest agency I worked with (Keystream) couldn’t engage with me as a sole trader, so I had to go via my brother’s ltd company. I’ve also encountered various forms which didn’t have appropriate choices for a sole trader.

In terms of banking - I set up a Santander Business account for £7.50 a month, purely as I already use them for my personal banking and credit card. I wouldn’t recommend them, and pretty sure there are free accounts available.

The benefit of having a totally separate account is to simplify accounting. I pay £21 per month to a FreeAgent reseller, which can be integrated with your bank account to make reconciliation easy. You can probably find similar software cheaper, although FreeAgent is pretty decent.

I’m now in the strange position of still effectively still operating as the same sole trader, but I pay all my tax in Sweden (where I live). I don’t think either country really understands my situation fully, so I have paid accountants in both countries to deal with HMRC / Skatteverket on my behalf. Just submitting my tax return today actually (deadline is tomorrow lol) - in Sweden it aligns with the calendar year.

Good luck!

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That’s the one. I always found paying tax for the year to April in the following January a real kicker, cos if you have a good year to April then a few rubbish months you’re in a real bind. I’ve just started using premium bonds to keep my tax, only taken 18 years to start following my own advice.

Fuck, I’ve been doing this for 18 years?!

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Can you elaborate on ‘premium bonds for tax’? You mean you buy some and it’s almost like putting cash aside, and then you cash them out come tax time?

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I think you can speak to HMRC and negotiate your payment on account figure, but nobody wants to speak to them unless absolutely necessary!

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Yep exactly. No interest as such but you might win a prize and you can get them out whenever.

I’m sure there are other ways to save but this seemed the easiest

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You can, I have had to a few times :slight_smile:

Always worth talking to them tbh, have saved myself a few fines by just throwing myself I their mercy. They’d rather get paid something and not ruin your business than demand everything and leave you broke

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Yeah for sure, I just found it so hit and miss whether you get through to someone nice and helpful or a complete knobhead. Also, I never want to hear that waiting music ever again, must have heard it for about 24 hours in total I reckon.

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Yes

Yes

Yes.

download

CWBAFT

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Thanks all, some massively helpful bits here.

@idrinkcans would you mind awfully if I dropped some copywriting specific questions your way via DM?

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No problems, fire away.

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This is a very good idea.

Also, if anybody does the National Lottery, consider just buying Premium Bonds every month instead. You’re more likely to win a reasonably significant amount in comparison, with the bonus of not actually losing any money.

This is definitely something I want to make sure I get into the habit of straight away because I know that if I don’t, carnage awaits!

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you definitely should because you are guaranteed to get caught out by the payments to account at some point. or they’ll just randomly up your PTA amount because they’ve projected that you’re going to earn more money next year and you’ll end up with a huge tax bill even though there’s a pandemic and you’ve barely been able to work. wankers.

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