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Taking the plunge: becoming a freelance designer
6. Polish your portfolio
Your portfolio is the single most important promotional item you’ll ever make, and it’s important to see it that way: it’s not necessarily about the pieces or projects you’re most proud of, but the pieces or projects that’ll make a prospective client hire you. If you’re pitching to small businesses, for example, concentrating on impossibly arty designs or enormously expensive multimedia might not be the best approach.
7. Tell the taxman
You need to tell the taxman that you’re going self-employed immediately [http://www.hmrc.gov.uk/selfemployed/register-selfemp.htm]. You’ll pay three kinds of tax: Class 2 National Insurance at £2.40 per week and then both Class 4 National Insurance and Income Tax on your annual profits. We’d suggest saving around 40% of your income to cover all of that.
Unless you’re one of those rare creatives who’s also brilliant with finances, we’d strongly recommend hiring an accountant. Doing your tax bill shouldn’t cost more than around £300, and you’ll often find that your accountant will suggest ways to reduce your tax bill.
8. Understand expenses
You can claim a proportion of your home bills – heating, power, electricity and even rent – against tax, provided that your home office is only used for business purposes (so if your office is in a corner of the bedroom, the taxman won’t like that).
The easiest way to work out what you’re entitled to is by square footage, so for example if your office takes up 10% of the overall square footage of your home, then you’d claim 10% of the electricity, gas and water bills.
Business and personal expenses must be kept separate. If you use the same phone for home and business use, you can’t claim the whole phone bill; if you travel on business but stay with friends, the taxman sees that as a personal trip, not a business one. You can’t claim for lunch or dressing gowns, but you can claim finance costs (eg. business banking charges), business mileage, computer deprecation and so on.
9. Investigate insurance
Your home insurance may already cover you for business use, but check the cover carefully. Home office cover of £5,000 sounds great, but there’s usually a per-item limit: £1,500 is common.
Watch out for exclusions too. Home insurance usually only covers you for computer work. If you expect clients to visit you’ll need dedicated business insurance and Public Liability Insurance.
It’s the same with car insurance. If your policy doesn’t say business use then you’re not covered for anything that might happen when you’re travelling to or parked at a client’s premises, and in most cases if your laptop’s stolen from the car you’re only covered if it was locked in the glove compartment or hidden in a locked boot.
10. Don’t stop moving
When you’ve got lots of work, don’t put all your eggs in one basket: what happens if a big client goes bust, or if the key person leaves, or if your signature style falls out of fashion, or if everyone embraces a technology or methodology you don’t know? Long-term success means paying attention to the market, spotting key trends and constantly learning new technologies, tricks and techniques – and it means having a wide range of clients so your mortgage doesn’t depend on just one or two.
Main image credit: Sabrina’s Stash (Cloud10 on Flickr).