What to expect your first year freelancing
Starting to work as a freelancer is exciting! If you’re making this big change, find out what to expect during your first year.
Setting up a business
The first step to start freelancing is to set up your business. You need to register your business with HMRC to let them know you’ll be paying your tax.
The most common way to start freelancing is to register as a sole trader, but you can choose to register as a limited company instead if that suits your needs better. Find out more about how to set up as a sole trader.
Part of working as a freelancer is finding jobs or clients. There are lots of different places you can look to find work!
- Job websites like LinkedIn
- Specific freelance networks
- Contacting companies directly to pitch your services
- Networking at events
- Word of mouth recommendations
- Marketing yourself so potential clients can find you
Once you start getting clients it’s important to build good relationships with them. Word of mouth referrals, long term jobs and returning clients are valuable sources of work that can come from happy customers.
Adjusting your pricing
It can feel challenging to set your pricing for the first time. There’s a lot to consider, from covering your expenses to how you value your time and skills. If you don’t get it right the first time, you can always adjust your pricing as you go.
Learning allowable expenses
Allowable expenses are running costs for your business that you can deduct from your profit on your tax return. It’s important to keep track of your expenses across the tax year so you can claim them on your tax return.
Make sure you keep receipts for any expenses as HMRC could ask to see them. You can keep your receipts online or the paper copies.
You can also claim for a proportion of some expenses that are used for both personal and business use, like internet bills if you work from home. Find out more about what you can claim as allowable expenses.
Turning a profit
Your business is starting to succeed when you turn a profit! A profit is when you make more money than you spend on expenses. When you turn a profit, you have surpassed ‘breaking even’ (when your business can pay its operating costs without making a loss), which shows positive growth. Find out more about how to measure profit here.
Finding your balance
Being your own boss can make it hard to know when to switch off work. So, during your first year you’ll also be figuring out how to find a work life balance. If you’re struggling, check out our tips on how to switch off and bring back the balance.
Doing your taxes
During your first year freelancing you’ll need to submit a Self Assessment tax return to HMRC if you earn over £1,000. Unlike when you’re a PAYE employee, you need to submit your income tax return yourself. Make sure you register in good time before the deadline, and have all your figures ready. Find out everything you need to know about how to do your Self Assessment tax return in our guide.
Getting to know accounting
Although accounting can seem daunting at first, it’s a key part of working freelance. Aside from following the rules from HMRC, doing your accounting regularly can give you the information you need to work strategically.
Accounting can bring insights on how much tax you can expect to pay, whether you’re making a profit, and who are your valuable customers. The list can go on!
Whether you choose to do your accounting yourself or to work with an accountant, Bokio accounting software is a great solution for freelancers.
With bookkeeping and invoicing in the same place, we have everything you need to help you manage your finances. Our automated reports let you keep track of your business performance, be Making Tax Digital compliant, and prepare for your Self Assessment tax return.
Bokio helps you get your accounting sorted so you can get back to working with your clients.