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|29-05-2012, 16:39||#1 (permalink)|
The Time Being
Join Date: Feb 2005
Freelance Design Basics
We started this thread a while back in the Mod forum - I think It's best we get it out there. Some experience from continental/overseas freelancers would be really helpful.
Incorporated vs. Sole Trader
For UK freelancers you will need to make a choice when you start out. Sole trader or limited company? For the interests of the this thread there's no real need to go into all the differences as there's masses and masses of documentation on it. However here's a summary:
—The main differences are tax related and the way you are paid. Sole traders take 'drawings' from the business account, as and when it's needed
—As a limited company you will be able to pay yourself a salary and give yourself 'dividends' - salary is taxed as income tax, dividends as corporate tax You will probably do a mixture of both as you need to pay yourself a basic salary to be eligible for national insurance.
Once you have decided on whether to become a sole trader or limited company you need to register your business. Both types need to notify the HMRC and Ltd's need to register at companies house (nominal fee around the £50-200).
If you employ contractors on larger projects, or staff on a permanent or causal basis, reaching the threshold of 60k will happen quickly. If you feel that some of the work is likely to be part of a big team, where your contractors will invoice you, rather than the client directly, you may want to consider VAT registration early on. While it's easy enough to switch, getting it all in inline from the start has it's perks. One benefit is that every quarter you are forced to submit your invoices as a VAT return - which means there's not a massive rush come the end of the year to get it all sorted. Also - You can claim VAT on business purchases which saves you quite a bit, obviously.
Once registered ensure your VAT No. is present on all invoices, stationery and emails.
You can also pay a flat rate VAT where you don't claim VAT on business purchases but pay a lower rate and pocket the difference this is good if you don't have many business expenses
UK Income Tax
This can be a bit of a minefield and will need an experienced tax account to help if you aren't confident in doing your own return. For me it was a no-brainer to get an Accountant in here - to file my annual return and save me a load of cash on expenses and allowances under a certain bracket of earning. As a rule of thumb putting aside 25% of what you earn into some kind of bond, or saving account is advisable. It can earn you money but remember it aint technically yours so don't effing spend it
UK National Insurance
You need to make basic contributions each month - sole traders can make a basic contrition of about [?]
[Ltd - fill in here please]
International VAT/Tax rules – You will be able to charge VAT to some countries, but not others. UK businesses do not charge VAT to the USA or Canada for example. If in doubt check with your accountant
Invoices - Sales & Purchase
The invoices you send to clients are Sales Invoices. Ensure these are numbered in perfect sequence regardless of the type of service sold. On your invoice you will need to make sure the following is included:
— Business / company name
— Registered business address / Contact details
— Clients name / Address
— Invoice Number (e.g. 000101)
— Summary/List/Description of services/goods provided
— Sub Total
— VAT (if registered for VAT)
— Payment terms (Corroborated in contract)
— Bank details (many folk forget this - you want to get paid quickly right?)
— International banking codes for overseas customers (IBAN for UK folk)
— VAT no. as applicable
Banking – Sole traders don't need an 'proper' business account - with the associated charges. A current account is fine, but it needs to be dedicated to the business. All money going into this account should correspond to a sales invoices. Purchases from this account should be backed up by invoices or receipts. A small benefit of business banking is payments are not made in your name but in the business name.
Accountants – Choose a local accountant. One man band, who you can visit at short notice - one that has other freelancers on his/her books is advisable so they understand you might not the be the sharpest when it comes to paper work
Solicitors – Same as above - you don't need to retain their services as this is very expensive but hold a consultation with a few to choose one you respect and keep their contact details safe!
Annual Tax Returns – [Fill gaps here]
Last edited by Limbo : 28-06-2012 at 20:51.
|29-05-2012, 16:51||#2 (permalink)|
Join Date: Jan 2008
Get harvest or another application to handle your finance administration
Once you have it diligently record every expense/ hour spent working/invoices.
Over time you will build up a wealth of information which you can analyze by using the built in reporting features.
From that you can start to build up a case history of projects and see how long things take in reality and how this compares to your estimates. Eventually you will be able to quite accurately predict the likely cost of something.
It will also highlight the types of clients or industry sectors that are duff in the financial sense.
All this infor can make you a bit leaner and fitter financially speaking
Dont know nowt about tax except to say that keep reciepts for absolutely everything and make sure you get all tax relief on all applicable parts of your business
Bring down IE6!
Last edited by CM_ : 29-05-2012 at 17:05.
|29-05-2012, 16:58||#3 (permalink)|
Join Date: Jan 2008
Learn to estimate properly
Cannot understate the importance of this.
This article is very good
Effective Strategy To Estimate Time For Your Design Projects | Smashing Magazine
Up your Productivity through planning and streamlining repetitive processes.
another gem of a read
Lessons Learned: Productivity Tips For Running A Web Design Business | Smashing Magazine