Freelancing

A freelancer is a self employed individual and does not work for any specific company. Being a freelancer means that you have: run your business for yourself and take responsibility for its success or failure, have several customers at the same time, can decide, how, where and when you do your work, can hire other people at your expense to help you or do the work for you, provide the main items of equipment to do your work, are responsible for finishing any unsatisfactory work in your own time, charge an agreed fixed price for your work, sell goods or services to make a profit.

The benefits of being a freelancer is you are your own boss, you can work when you want to, you can set your own hours of day and any money you make is your own.

The negatives of being a freelancer is incomes can be irregular, you have to fill out tax returns/ self assessment and you do not have access to sick pay and many government benefits (however they could potentially be eligible for Universal Credit).

Creatuve media has many sectors in the field, these include:Creative, Marketing, Technical, Legal, Managerial and Financial.

In order to be successful being a freelancer in a media sector you need access to resources. It can take time and money to build up these resources. Any equipment you do buy can be offset against future tax bills and will help reduce your yearly payment. For example a music producer's resources would be: access to recording studio, suitable computer, software, soundcard, additional plug ins, hardware synths, headphones/monitor speakers and internet access.

Resources:

This mind map I created was from Mindmup and it was the job role for a photographer and the resources needed to being a successful photographer.

Steps to becoming a freelancer:

-Decide what company you want to be

-Decide what you are going to name yourself

-Register as self-employed

-Decide your workplace

-Invest in the right equipment

-Sort your finances

-Take out insurance 

-Find work

-Stay motivated

Options for setting up your company:

-Sole Trader. A sole trader means you are self employed and you run your business as an individual. The benefits of being a sole trader is you make all the decisions and retain all your profits. However the negative is you are responsible for making decisions which can cause stress if failures occur.

-Partnership. A partnership means you are self employed but you work alongside with at least one other person. A benefit of a partnership is you get to share the workload of responsibility and ideas. The Negative is you have to split profits and you need to be able to trust the person and work effectively with the other person.

-Limited company. A limited company is defined as your company is kept separate from you and your set up will include at least one director and one shareholder. The benefit of this is limited liability which means that if the company goes into financial difficulty you are not personally responsible for it. The negative of this is there are more rules and legal technicalities. You get paid via a limited company by: Director's Salary which means you will need to set. up for PAYE and pay National Insurance contributions, Dividends which is one off payments taken out of the company's account and paid to shareholders, Director's Loan which is a payment that is neither a salary or a dividend. The definition of a loan is money that is borrowed that is expected to be paid back.

Some people believes being a limited company gives you more credibility. To distinguish if a company is limited is if the company has a 'Ltd'. There are many well known companies that will only deal with limited companies as they think they are more professional.

The main benefits of being a sole trader or partnership is: you want to keep your business simple, you do not plan to expand your business significantly, you want to keep your paperwork uncomplicated and as an individual you have total control. The main benefits of being a limited company is: if there is a situation where if you are in a financial difficulty you will not be sued, you have limited liability and in extreme situations a limited company can be liquidated and debts can be written off. Liquidation is defined as the process of selling the company's inventory to generate cash.

Tax

If you are self employed or own your own company you must be aware of tax liabilities. When setting up a limited company you must register your company with Companies House and set up self-assessment with HMRC. HMRC stands for 'Her Majesty's Revenue and Customs' which refers to the tax authority of the UK government. They are also responsible for collecting taxes, paying child benefits, enforcing tax and customs laws, and enforcing the payment of minimum wage for employers. The picture below is the form when setting up a limited company.

If you are setting up yourself as self employed you must register with HMRC to do your tax returns. When you are self employed you need to decide a few things such as: decide whether you want to do a paper based on online tax return, register online for self-assessment, you will be sent a unique Taxpayer Reference (UTR) by post and UTR will help you set up your account.

The tax year runs from a set period which is 6th April 2021 until 5th April 2022 which is that you need to keep track of money coming in and out during this period. To keep track of your tax records is by: keeping receipts, use online banking, use an app (eg Sage, Quickbooks, Clearbooks), pay an accountant.

Incomings is any money you have made as a result of work you have done for clients or companies. This could be royalties based on streams and sales or one off payments for work carried out on certain jobs. Outgoings are consumables (such as Adobe software, equipment, internet), travelling expenses, Home Administration (rent, council, tax, electricity, gas, water, insurance), telephone usage. With some of your outgoings you will need to decide what percentage of time per week is spent using them for your business and this then can be deducted against your tax bill. The more expenses you can claim for, the lower your tax bill will be.

  Profit=Incoming-Expenses

Paying tax depends on your job. If you have a PAYE job as well this will need to be taken into account. You have to submit a tax return by 31st October 2022 (paper) and 31st January 2022 (online).

You file your information online on the HMRC self-assessment website and they will then calculate the tax that you owe. If it is a small amount and you have a PAYE job then your tax code can be adjusted and it can be deducted out of your wages on a monthly basis. However if it is a bigger amount you will be given a deadline to pay it which is sometimes split into two to make it more manageable.

National insurance can help to build your entitlement to certain benefits depending whether you are employed or self employed, such as the State Pension and Maternity Allowance. You need to be an employee earning £183+ before contributions are taken or if you are self employed and make a profit of £6,475+ a year.

Value added tax (VAT) was introduced in 1973 and it is a tax applied to the purchase price of certain goods and services bought and sold in the UK. The rate of VAT was raised from 17.5% to 20% in January 2011. Postage stamps and financial and property transactions (e.g house sales) are things exempt from VAT. VAT is important to a freelancer as if you are part of a limited company you are able to offset what you have paid in VAT against profits (with VAT added) that you have collected.

Financial:

Whilst being a freelancer it is critical to save your money and be conscious of your money, this is because freelancers do not have a regular income as they work for themselves and not for a particular company.

An invoice is an instruction sent to a company to secure payment so the freelancer knows they will definitely be paid. There should be always backups of invoices and there should be reminders set so the freelancer knows they are definitely getting paid.

The term 'invoicing terms and conditions' is an agreement between the freelancer and the client and they discuss when to pay the freelancer.

The term 'Net 7' is payment that is due 7 days from the invoice date.

The term 'Net 21' is payment that is due 21 days from the invoice date.

The term 'Net 30' is payment that is due 30 days from the invoice date. This is one of the most common payment terms for small businesses and freelancers.

To make sure freelancers get paid they need to: agree their terms, raise an invoice once the freelancer has done their work, send a reminder a week before the payment is due, chase a late payment (if necessary).

The term overheads is an expense. Examples of overheads is: rent, utilities e.g gas, insurance, marketing, repair.

Personal survival budget is a calculation device that you can use to work out how much money you are left with after you have deducted all your expenses.

A profit margin is the percentage of revenue that is left after all expenses has been deducted. The higher the percentage, the more profitable the business. The importance of profit margin is it shows you how much your business is generating, the health of the company and you can see the problems early on.

To calculate a net profit margin=net profit/revenue

Example:

Gross sales generated: £40,000

Expenses paid out: £30,000

Net profit made once expenses are deducted: £10,000

£10,000/£40,000=0.25

0.25x100=25% (which is the profit margin