How do I become self-employed guide

Customisable business insurance
01 February 2019
8 minute read

The self-employed lifestyle is very tempting. Time-flexibility, the freedom to work where you want, the ability to be your own boss. Perhaps that’s why self-employment is blossoming like never before in the UK.

But it’s not all lie-ins and self-awarded holidays. Setting up as a self-employed contractor is a risky endeavour which involves a lot of uncertainty and more stress than you might imagine. To get it right, you need to be prepared. That’s why we’ve written this guide, which will tell you how to be self-employed before you take the plunge.

Advantages and disadvantages of being self-employed

If you’re racking your brains over how to be self-employed, one of the best exercises you can do is to weigh up the pros and cons. Of course, these will vary a lot depending on your own situation, but we’ve covered some of the most common ones here:


  • Flexible hours: Control over your own time prompts many to set up as self-employed. With self-employment, you have more chance to achieve that elusive work/life balance.
  • Flexible location: Wave goodbye to office cubicles and commutes. Being your own boss means choosing your own workplaces. Yes, you can work anywhere!
  • Cheaper startup costs: This varies a lot depending on what you’re doing, but many freelancers need nothing but their own brains and some fairly accessible bits of kit (e.g. laptops or cameras).
  • It’s becoming more accessible: There are increasing amounts of services, social networks, co-working spaces, apps, tech, organisations and more popping up, all aimed at helping small, self-employed contractors towards success.


  • Insecurity: The reassuring weight of the monthly paycheque in your pocket will vanish when you go self-employed. If you don’t get work, you don’t get paid. All freelancers experience lean months – and they’re stressful.
  • Loneliness: If you’re the type who needs people around to bounce off, be prepared for a shock. Isolation is one of the major issues which freelancers struggle with. If you’re a real extrovert, consider operating from a co-working space.
  • No employment benefits: This is a biggie. If you get sick and can’t work, you can’t pay the rent. Holidays won’t be covered by holiday pay. All of those safety nets available to employees will vanish once you register as self-employed. So, take a deep breath and prepare yourself.
  • Extra admin: You don’t just have to do your actual work as a self-employed contractor. You also have to do the work which enables you to do your work. By which we mean admin. Lots of it.

Getting setting up as self-employed FAQs

Do I need to register as self-employed?

Yes – but the kind of registration you need depends on whether you’re setting up as a sole trader or as a limited company.

If the former, you just need to set up as a sole trader with HMRC. You fill out a self-assessment tax return every year, and Bob’s your uncle. However, this option does not separate your company from your own personal tax account – meaning that you’re directly liable for any problems which your business incurs.

If you become a limited company, your business is recognised as a separate entity so you’re not personally liable if your business gets into debt. There are also tax perks. However, there is also a ton of extra paperwork which comes with this.

When should you register as self-employed?

From HMRC’s perspective, you need to register as self-employed within three months of initial trading. From your own perspective, you may want to ease yourself in gradually before taking the plunge and going fully self-employed. Put some feelers out, get some potential clients on board and some projects in the pipeline before you quit your day job. Freelancing comes with a lot of inherent insecurity, so it’s a really good idea to make sure your self-employment plan is viable before you jack in your reliable salary.

Can I have a job and be self-employed?

Honestly, it depends on how many plates you’re capable of juggling. If you’re asking ‘Can I have a full time job and be self-employed?’ we’d query how much time and energy you intend to devote to either endeavour. If you’re asking ‘Can I work part time and be self-employed’ – well, that’s more viable, and it’s a good way to keep cashflow reliable in the early days. However, as your business grows it will get harder and harder to balance multiple commitments.

How much should a freelancer charge?

A lot of freelancers start off with low rates, in order to attract business. But do be aware that pricing yourself too low could make clients suspicious that the quality of your work will be correspondingly low. Remember, you need to cover your costs – and your time is valuable! Research the market standard rate, and test the waters. Most self-employed contractors work out what to charge through experience. Don’t be afraid to experiment with pricing. So long as you’re honest and transparent, you’re the boss of costs!

How do I get work as a freelancer?

There’s no hard and fast way to get work as a freelance contractor. Word of mouth is always excellent – so work your existing network. You may also want to set up your own website, proactively market yourself, and look into online freelancing marketplaces such as Upwork or The Work Crowd.

Avoiding late payments

Late payments have felled more than a few freelancers. There’s no surefire way to make clients pay up on time, but we do have a few hacks which might help:

  • Get everything in writing: Most clients wouldn’t dream of not paying for your hard work, but it’s better to be safe than sorry. Agree in writing what you’re doing, when you’re doing it, what you’re being paid for it, how you’re being paid for it, and any late-payment fees (which you have a perfect right to charge, by the way) at the get-go. If late-payment is a persistent problem for you, consider charging 50% of the project’s cost upfront.
  • Keep a record: Track all correspondence with clients. This ensures clarity on what’s been agreed and can be produced as evidence if you need to argue anything in court. If your negotiations have been verbal, get written confirmation of everything you agreed.
  • Invoice on time: Timely invoices will reduce the risk of late payments. Consult with your clients about the best time to invoice them. An accounting system or invoicing app such as Albert can be very beneficial when managing invoices and payments.

Tackling late payments

It’s inevitable that you will get the occasional late payment. It’s not always the client’s fault, and it’s not always your fault, so don’t go in all guns blazing to sort things out. Be sensitive. Here’s a checklist of things you can do:

  • Stay visible: Send a friendly email reminding your client of the outstanding fee.
  • Pick up the phone: If the client is still not responding, call them. It’s much harder to hedge over the phone.
  • Stop working: Don’t work until they pay you. But do inform your client (politely!) that you’re doing this – just downing tools without warning or explanation isn’t going to help anybody.
  • Consider a payment scheme: This is a helpful option if your client is struggling financially.
  • Take legal action: This should be the last possible resort. If the client continues to ignore your requests, you can take the dispute to a small claims court.

Business insurance

You very definitely should consider business insurance as a self-employed contractor. Among the many admin headaches of freelancing is the fact that you’re fully liable for anything which goes wrong on your watch. But don’t worry – the right insurance can take this headache away. Here are a few of the policy types you might need:

Professional Indemnity cover

If you offer consultancy or advice services, professional indemnity insurance (PI) is essential. PI will protect you if your client suffers financial loss as a result of your advice (or if you’ve made a mistake).

Read more on PI in our blog on who needs professional indemnity insurance.

Contents insurance

Every worker needs their tools. Whether you’re reliant upon a laptop or a welding kit, your work tools are your livelihood and you need to protect them. Consider taking out both office contents insurance and portable equipment insurance.

Watch out for: co-working spaces can complicate office contents insurance policies. Consider a PI policy like ours, which covers things stolen from co-working spaces. To validate the insurance, simply secure your property with a Kensington Lock while it’s unattended.

Public liability insurance

PL protects you if you cause injury or property damage to a third party while doing your job. The level of cover (if any) that you need depends on what you do. For example, if you’re a freelance animal trainer you’re likely to require a higher level of cover than, say, an office-based designer.

Read more here about why you might need to review your public liability insurance.

Cyber cover

Cyber insurance is increasingly relevant as more work goes online and data becomes more valuable. If you handle a lot of client data, you probably need cyber insurance.

7 freelancing hacks

With the basics out of the way, here are some clever tricks to help make your freelance career a success:

1. Start it as a side project: Starting off small in your spare time allows you to build up a client base and iron out details before fully jumping in.

2. Nurture your network: Make an effort to nurture all your existing contacts, while also spending time finding new ones. Even if somebody isn’t immediately useful, you never know where they’ll be in the future!

3. Focus on the mission critical: Look at your ‘to do’ list and learn to prioritise ruthlessly. If the job isn’t going to be as beneficial as your other projects, then ditch it or outsource it.

4. Ditch the drudge: Find somebody else to do time-consuming tasks. Whether that means hiring an accountant or employing a housekeeper, free up some of your time by getting outside help.

5. Find a mentor or coach: Working with a coach or mentor allows you to air the issues you’re grappling with and work through a solution.

6. Hack your skills: You can find loads of free guides and advice online to help you learn new skills, whether through YouTube videos, articles or by asking around in relevant business forums. A few hours dedicated study time and you’ll be an expert in no time.

7. Join a co-working space: Co-working has revolutionised the lives of solopreneurs everywhere with ready-made networks. Many co-working spaces also offer mentoring, training and events.

If you’ve always dreamt of a more flexible way of working, then freelancing could be the answer you’re looking for.

This content has been created for general information purposes and should not be taken as formal advice. Read our full disclaimer.

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