Money Matters Team

Top Tips for Starting Out as Self-employed

By Money Matters Team 23/06/2022

Top tips for starting out as a freelancer

Whether you’re working reduced hours or thinking about your next career move, going freelance can be an exciting way forward. We’ll discuss our top tips on paperwork, planning and a healthy work-life balance to get your business off the ground. Plus we’ll have a discussion of the pros and cons of working freelance if you’re still deciding if it’s right for you.

Taxes, expenses and ways to save

When you start out as self-employed (i.e., your employment status for tax purposes when freelancing), you need to be careful to file the right paperwork. Depending on your business, you can register with HMRC as a sole trader, limited business or partnership. Being your own employer also means being responsible for your own taxes and national insurance contributions.

  • Watch out for deadlines, as self-employed taxpayers have to register for self-assessment by 5 October in their business’s second tax year. Tax returns need to be filed by specific times each year as well. And if you miss a deadline, you’ll be fined £100 or more, depending on how late you are.
  • If your business has expenses – and it probably will - you can deduct these. Make sure you’re aware of what counts as an expense to avoid paying too much tax. If you work at home, a proportion of your household costs like rent, utilities and phone bills can even count as business expenses.

Budgeting and insurance

Freelancing can bring great flexibility and freedom to your life. But not having a regular monthly pay cheque means you’ll have to get used to an unpredictable income every month. That’s why budgeting and savings are musts for any freelance business.

  • Busy one month, but scraping for work the next? Freelance income tends to fluctuate, so save up during good times to spare your nerves when business is slow. Ideally, aim to keep six months’ worth of living costs stashed away in an emergency fund. Also, have a look at personal insurance options, like income protection that can cover your income in case of injury or illness, as well as critical illness cover and life insurance.
  • Keep track of your business expenses. Ideally, separate these from your personal spending by using a different bank account. At the very least, keep a spreadsheet. This will help you stay on top of client payments, or filing your tax return. Online invoicing tools can come in handy as well if you have many clients.

Added responsibility and unpredictability won’t just apply to your finances. When starting freelance work, you’ll need to think through the risks to you and your business, as well as your business premises (which may be your home) and vehicle.

Here’s what to know about freelance risks and insurance:

  • You can be held accountable for all kinds of mistakes or accidents related to your work. From giving poor advice to having a servicing slip-up, a small incident could end up costing you a lot if you’re sued. Read up on the most popular types of freelance insurance to decide what cover you need, given the type of work you do and your individual situation.
  • Your car and work space can face risks as well. If you’re visiting clients, driving between locations or using your car for work in another way, you need to disclose business use on your car insurance. If clients visit you at home be sure to tell your home insurance provider, because you can be liable for any accidents that occur. Plus, if you use tools or other equipment, it’s a good idea to look into contents, equipment and stock cover.

Make the most of it

A life with flexible working hours and less commuting can open up new possibilities for family time and relaxation. But self-employment is also notorious for blurring the lines between work and leisure, or home and office. Strike a healthy work-life balance by:

  • Scheduling your work time as well as time off
  • Creating separate physical spaces in your home for work and leisure
  • Keeping track of the time you spend working for clients – and charging accordingly
  • Taking advantage of the flexibility; if you’re not bound by a specific office location or time schedule, make the most of it

Pros and cons of working freelance

While freelance work certainly has its perks, there are also difficulties to consider before taking the plunge. Does it make sense for you to work freelance? Let’s take a look at the pros and cons of working freelance rather than being an employee to help you decide if it’s the best option for you.


  • Unpredictable income. Probably the biggest drawback of working freelance is losing the steady income stream you get as an employee. This can be especially problematic if you’re the sole bread winner in your household. Freelancers need to be quite proactive in setting money aside when they are earning money to cover any periods where work is scarce.
  • You need to sell. Unless you’re really lucky, work won’t just appear on your doorstep. Regardless of your profession, you’ll need to spend time marketing yourself, something that doesn’t come easily to everyone. That means getting your name out there by networking, advertising, being active on social media and generally being your own best cheerleader.
  • Admin. As a freelancer you’ll have more administrative tasks to manage, such as organising business insurance, chasing invoices, tracking business expenses for tax purposes, etc.
  • No sick pay or holiday pay. You can take as much time off as you want when you’re freelancing, but you won’t get paid for any of it. In addition, you might miss out on employee pension schemes, private healthcare or other employee perks.
  • Isolation. Depending on the work you do, freelancing can be very lonely work. That doesn’t just mean no one to gossip with during a coffee break; it also means no one to brainstorm with to solve busines problems.


  • Control over your work schedule. Many (but not all) freelancers can choose when and where they work. Night owls can sleep until noon. Morning people can finish their day by early afternoon. Freelancers can work part time (e.g., working parents, students, etc.) or over time (e.g., a highly-motivated person with sites set high). It’s up to you.
  • Control over your client list. As a freelancer you can set the tone for your work, choosing projects that interest you most and avoiding clients that you’d rather not work with. Unlike an employee, a freelancer can blame their busy schedule and turn down anyone they like!
  • No commuting. While some freelancers may need to work at the client site, odds are you’ll have more flexibility to work from home if that suits your lifestyle better.
  • Develop the skills you want. From taking courses to picking certain types of projects, you can fill gaps in your learning and become an expert in the niches you really care about.
  • Being an entrepreneur. A freelancer runs their own business. While it requires effort to manage the various aspects of running a business, it also means you’ll have the satisfaction of seeing your business grow - and knowing that you’re the person who made it happen!

And finally, good luck

Everyone here in the Money Matters team would like to wish you all the very best in your exciting new venture.

This Money Matters post aims to be informative and engaging. Though it may include tips and information, it does not constitute advice and should not be used as a basis for any financial decisions. Sainsbury's Bank accepts no responsibility for the opinions and views of external contributors and the content of external websites included within this post. Some links may take you to another Sainsbury's Bank page. All information in this post was correct at date of publication.