Debitoor Dictionary

Accounting terms explained in a simple way

Over 150 Articles for Founders and Entrepreneurs

  1. Corporation
  2. Entrepreneur
  3. Limited company
  4. Partnership
  5. Sole trader
  6. Revenues

Freelancer – What is a freelancer?

A freelancer is a self-employed person who offers services, often working on several jobs for multiple clients at one time.

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Freelancers usually earn money on a per-job basis, charging hourly or daily rates for their work. Freelance work is usually short-term.

While a freelancer is not officially employed by another company, they can be subcontracted by other businesses. It’s common for freelancers to work on several different jobs or projects at once, but some freelance contracts may restrict who else the freelancer can work for until they complete the project.

Some of the most common freelance jobs are within creative industries such as graphic design, copywriting, website development, or photography; however, freelancers can work in almost any service-based industry, such as translation, consulting, or catering.

Freelancer vs. sole trader

Like sole traders, a freelancer fits under the broad term ‘self-employed’, but while a sole trader is a specific businesses structure registered with HMRC, the term ‘freelancer’ does not refer to any specific legal status. Instead, it refers to the type of work carried out.

As such, not all sole traders fit the definition of a freelancer, and freelancers are not always sole traders. Although the sole trader business structure is the most common structure for freelancers, freelancers may also choose to register as a limited company or partnership instead.

How to become a freelancer

When you first start working for yourself, you will initially be classified as a sole trader. As a sole trader, you will need to register with HMRC to make sure that you pay the correct Income Tax and National Insurance.

You may also need to register for:

  • CIS if you are working as a contractor or subcontractor in the construction industry;
  • VAT if you have an annual turnover of more than £85,000.

If you register as a partnership or limited company, you will have some additional responsibilities, such as choosing and registering a company name.

Pros and cons of freelance work

If you are thinking about becoming a freelancer, its important to weigh up the advantages and disadvantages of freelance work.

Some of the advantages of being a freelancer include:

  • Flexible work schedule: you can choose which hours to work and can set your own schedule to fit around other commitments.
  • Choice and variety: whereas employees are often told which clients to work for, as a freelancer, you can pick your projects and are less confined to specific markets or sectors.
  • More control: you can set your own goals and will have more say in the direction of your business.

On the other hand, there are several disadvantages to consider, including:

  • Less stability: because freelance work depends on reaching enough clients, many freelancers have less financial stability and less guarantee of future work than employees
  • Fewer benefits: many companies offer benefits for their employees, such as insurance or pension plans. Self-employed freelancers would be responsible for their own perks and benefits.

Debitoor and freelancers

As a freelancer, one of your main duties will be keeping on top of your finances. With Debitoor invoicing software you can create professional invoices, take control of your accounting, and get an instant overview of your cash flow.

Designed specifically for small businesses, sole traders, and freelancers, Debitoor is intuitive and grows with your business.

Try Debitoor free for 7 days