UK Freelance Interest Hits Record High
Google Trends data reveals that searches for ‘how to become a freelancer’ hit their highest point in the UK last month since records began in 2004.
There is a massive psychological transition to make when you leave being an employee to working as an independent contractor. When you work for someone else, you go to work, do what you do well, and go home. Once you start working for yourself, there is no one looking after you. The moment that you start working by yourself, everything is on you. Computer problem? That is on you. Client doesn’t pay? That is on you. Still, UK freelance interest hits record high!
We spoke with Andrew Smith, co-founder of digital agency Tenscope. Andrew understands this transition firsthand. A freelancer-turned-agency founder, Smith warns that while the barrier to entry has never been lower, the administrative burden in the UK is higher than most anticipate.
Master The Compliance Landscape
For UK employees, taxes are simple. You pay your tax through payroll, and your employer handles everything else. You receive your money, and you spend it. When you become self-employed, you have a very different situation. You must register with HMRC, and you are personally responsible for handling National Insurance contributions. However, the most critical issue regarding compliance is understanding IR35 (the off-payroll working rules).
Establishing a Structure To Protect Yourself
Although it may seem less complicated to register as a sole trader, Smith stresses the importance of registering your company as a Limited Company. “It costs around £100 to set up, so it’s really not expensive,” he says. The main advantage of establishing a Limited Company is to reduce the amount of financial liability you have as a business owner. “The worst thing that could happen to you at work is you get sacked,” Smith warns. “But if you’re a freelancer, and you make a mistake, you could be sued.”
Smith continues, “If you have not established a Limited Company, and you have not obtained professional indemnity insurance, you could be putting your house at risk.”
Outsource The Distractions
“You cannot transition from going to the office and sitting at your desk every day to performing multiple functions such as finance, IT, HR, and sales/marketing,” according to Smith. The volume of tasks can quickly overwhelm you. Smith’s solution is to outsource as many administrative tasks as possible immediately. Whether it is utilising software platforms to manage your billing or connecting with other freelancers to share resources, you must eliminate the friction created by administrative tasks to allow you to concentrate on the work that generates income.
Counteract Isolation to Maximise Sales
Transitioning from working in a busy office to working alone can be disorienting. “Going from having to interact with others at the water cooler to working alone in your front room can be challenging,” Smith admits. Coworking spaces provide two benefits to freelancers. Not only can coworking spaces help maintain your mental health and well-being, but they can also serve as a catalyst for sales. “No sales means no business,” Smith reminds. Many freelancers complete projects and realise they have little to no pipeline to follow new opportunities because they ceased networking due to their time-consuming workload.
Why is this current trend happening now?
Smith believes that this is due to a perfect storm of push and pull factors related to the different generations in the UK workforce:
Impact of UK policy: Smith also states that recent legislation has placed an additional burden on employers (i.e., employment rights from the first day), making it more expensive for them to hire permanent staff. “It is a lot easier because you don’t have any employment risk if you are just hiring a freelancer,” Smith explains.
Gen Z and the AI Shift: Large corporations are reducing their graduate intake levels because many entry-level tasks can now be handled by AI, thus prompting Gen Z to create their own opportunities. Growing up in a completely unstructured digital environment, Gen Z sees freelancing as a normal part of the journey, rather than a risk. “Digitisation of the economy is the enabler”, according to Smith, “but AI is the catalyst”.
The ‘Plan B’ for older workers: For professionals in their 40s and 50s, the motivation is security during the cost-of-living crisis. “They are worried about their jobs,” notes Smith. “They figure if they get made redundant, then they are in trouble.” Many are building freelance careers as a ‘Plan B’ to ensure they have an income stream if their role is made redundant.