If you are in the UK and thinking of going freelance or about to, you’re probably wondering what choices you have for setting yourself up to work at creative agencies. In this article, I’m aiming to give you an overview of the options, which you can then go and look into yourself.
Some methods are better than others, and in all cases you will need to get further advice than I’m giving here. Tax laws are complicated and change all the time, so it’s best to get professional advice and do research in order to find the right solution for you.
Working PAYE through a recruitment agent
This method means you would effectively be employed by an agent, and they would send you to work at various agencies on their behalf. The agent would pay you a salary and sort out your national insurance and income tax contributions. You would also get holiday allowance in the same way as full time work. This method makes it quite simple for you as there isn’t much paperwork to do, but it’s not the most efficient from a tax point of view.
To find agents that specialise in the creative industry you could ask around for recommendations, or you could use a directory such as on Creative Match.
Umbrella companies
You can also freelance at agencies by working through another business (what’s known as an umbrella company). They would take a small percentage of your earnings as a fee and look after your tax and other paperwork. Like with the previous option, this method is also quite simple but you pay higher tax.
There are many of these companies to choose from so you might want to do some research or get recommendations. To find out more about umbrella companies you can read this article or view this website.
Sole trader
This is the simplest way of starting to freelance, and basically means you are self-employed and in business as an individual. You would be responsible for all your own tax, national insurance contributions and other paperwork such as expenses, and so may need the services of an accountant.
However, this isn’t a recommended way to freelance at agencies these days due to changes in UK tax law, and I don’t believe recruitment agents are able to find you work if you use this method.
You can register as self-employed or find information by on the HMRC website.
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The most tax efficient and independent way to work as an agency freelancer is by setting up your own business (which is a separate entity to you in terms of tax). You would then work at agencies as an employee of your company subcontracting your time to them.
Whilst you can set a company up yourself, I would highly recommend you get an accountant to help you and to look after all the tax paperwork throughout the year. It’s well worth the cost so you can free yourself up to concentrate on things like issuing invoices, chasing payments and finding work.
Whilst this is an attractive method to use for freelancing, it’s worth noting that it’s more of a commitment. If you can only see yourself freelancing for a few months or so, it would be better to chose a different method. Also, the laws regarding subcontracting like this are complicated. You will need to do some research and get advice by asking an accountant, having a look around the Business Link website or a through a contractors organisation such as PCG.
Again, you could ask for recommendations for accountants, or you could use a directory such as on Creative Match.
Hopefully this list will help you make some decisions or point you in the right direction to find out more. If you are looking for a similar guide for other countries, we are busy compiling information on the US and Australia at the moment and will post articles on these soon.
Related articles
Further information
- Freelancing Glossary
- Business Link – business names & structures
- Creative Match – useful directories
- Freelance Supermarket – useful directories and information
- Setting up a limited company in 3 steps
- How do I set up a Limited Company?
- PCG – a contractors organisation
- HMRC website
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Just a quick note to say that I have been working as “Sole Trader” since going freelance back in November 1996 and I am still doing so. Most of the Agencies I have undertaken assignments for I have been employed as PAYE. But with some, I invoice the client directly and the Agency invoice for their “Finder’s Fee” to the client seperately. I still have to make sure my returns are all sorted, with or without an Accountant. I would definitely recommend the online tax return, you have more time to file and get instant receipt of your return and a pdf for electronic records. Duncan.
In regard to setting yourself up as Limited Company, see if you can do as much of it yourself. I went thru 1st Contact and although they set me up fast with bank account and accounting, they charge a lot! and I’m still paying for it monthly.
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