The Ultimate Getting Started Guide for UK Freelancers and Contractors

From making the leap to bookkeeping, accounts, organisation and productivity this is the best collection of advice and links for new and experiences UK freelancers and contractors. Learn some simple, yet effective techniques for finding work, chasing debts, getting paid on time and how to motivate and market yourself.

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“Great advice. Nice to see a freelance guide from the UK point of view” – Mark B

“EVERYTHING you need to know about going Freelance, this is really great!!” – Kelly H

1. Base the business on what you enjoy

When your hobby/passion/skill becomes your full time job, it never really feels like work. Leo Babauta has an excellent introduction to making a living doing the things you love and our ‘Making a Living Without a Job’ podcasts should give you a few ideas on how to live a ‘joyfully jobless’ life.

2. Write a plan

Prepare a basic business plan to set out your vision, market, and how you propose to reach out and sell to that market. Include financials and review the plan every six months or so.

3. Find dedicated space

Create space in the house that is your workspace. When in that space family and friends know you’re in business mode and you can walk away at the end of the working day. Invest in a good desk and chair as you’ll be spending quite a bit of time at and in them!

4. Create a professional front door

When customers come calling, be sure they’re met with a professional welcome. This applies to the way you answer calls, to your website, company stationery and even the places in which you choose to meet with clients.

5. Make the most of social media

Tools such as Facebook, Twitter and LinkedIn have been warmly embraced by the home business community. They are free to use and act as business development channel and a virtual water cooler for the moments when you miss the banter of an out-of-home office. Read our Marketing Yourself features to find out how to boost your social marketing mojo.

6. Become an expert

Set yourself up as an expert in your field by blogging/tweeting about the subject, writing a report, publishing a book or hosting an event. Being an expert gives credibility and with that, comes customers. You can also contribute to Freelance Advisor.

7. Never stop learning

Part of becoming an expert is continually picking up intelligence from those around you. Keep an eye on what others in your industry are doing, read about successful entrepreneurs and tune in to trendspotters so you can prepare for new market opportunities.

8. Get out of the house!

Attend networking events, work from the local café, sign up to a personal development course. It’s good to get out of the home office but be sure you can still be contacted and respond via your mobile/laptop/webmail etc. This is your road warrior kit!

8. Do what you do best and outsource the rest

To grow the business, focus on the core product of the company and subcontract non core tasks to other experts and professionals. Tasks like admin, accounting, PR and fulfilment.

10. Follow the golden triangle

To keep the business in balance, spend roughly a third of your time on three things; customer care, business development and admin. That way you’ll have a smooth running business with happy customers and new income streams on the way!

Emma Jones is Founder of Enterprise Nation the home business website and author of ‘Spare Room Start Up – how to start a business from home’. Her next book ‘Working 5 to 9 – how to start a business in your spare time’ will be published in May 2010.

The one thing you must do this year for your work to take off…

I’ve been advising people for 5 years on how to make their own business work and whether they’re a freelancer, consultant, coach, speaker, or internet entrepreneur, I’ve discovered one defining factor that consistently separates those that succeed from those that struggle.

The factor I’m talking about isn’t having a fancy website, or masses of web traffic, or the smartest marketing, or even the best sales skills. It’s something more fundamental than that. The distinguishing trait of those whose businesses really take off is that they sell the right thing – they have a killer offer.

Until you’ve got a killer offer – something a lot of people really want – all the marketing in the world won’t help you. So how do you create one?

Three keys to building your killer offer

• It must be based on something you love doing. Firstly, it takes a lot of time and effort to build a successful business so you have got to choose something that you will enjoy working on and will hold your interest. It just won’t work otherwise. Secondly, if you build a business around the things you love doing a lot, you’ll already have a competitive advantage. It’s hard to compete with someone who loves what they do. You’ll be happier too and as recent research shows, happiness leads to success.
• It must be something you have real talent for – but understand that most people’s idea of talent is far too narrow. Your greatest talents might be things that never show up on a CV: the ability to connect with almost anyone, your endless supply of creative ideas, an obsession with getting the details of a project just right. Focus on those things that come easily to you. As marketing guru Seth Godin says, do what you’re best in the world at, quit everything else.
• Your offer must meet a pressing need – it should solve a problem or address a pain that lots of people have. When you work out what this is, you’ll find you connect directly with the people you want to work with and dramatically reduce the time to win business. To find the pain you address, think about this: What’s the biggest concern for the people you work with right now that you can help with? What do they wake up in the morning stressing about? What often irritates or frustrates people in the area you work in? Once you know what it is, you can start to speak directly to what is at the forefront of your prospects’ minds. Get all this right and you’ll find you gather momentum quickly – you’ll generate word of mouth referrals and attract more and more business. You’ll be doing work you enjoy and you should find you can raise your prices too!

Want to find your own killer offer?

This January I am leading a small group of people step by step through a process to find their killer offer and tell the world about it. It’s packed with tools, tricks and blueprints to show you how to finally get paid well to do the work you love doing – whether you’re just starting out in business or you’ve been self employed a while and would like to get better results with less struggle.

Learn more about the programme here

John Williams is author of Screw Work, Let’s Play: How to do what you love & get paid for it to be published by Pearson in June 2010. He is a former Senior Managing Consultant at Deloitte and has consulted independently to the BBC, Siemens and Accenture.

“All too often Government and policy framers have failed to pay adequate attention to the needs of the UK’s 1.4 million freelancers. Freelance businesses are part of the bedrock of the private sector, bringing a degree of flexibility and a skill set to the economy which is a real asset for UK plc”, said John Brazier managing director of PCG.

PCG recently launched its Fairness, clarity, recognition: Manifesto for freelancing in what will be a General Election year. Copies have been sent to all MPs and PPCs as well as stakeholders.

John Brazier added: “There needs to be a clear recognition of freelancing as a valid way of working; fairer taxation, better regulation, easier access to the market for the smallest businesses and a proper appreciation of the changing work patterns for millions of people.”

PCG is leading the way by calling for a fairer tax and regulatory regime.¹ “We want to see a pro-business climate fostered in the UK, a real commitment from policy framers to think small first, not just say it. Fair regulation means regulation that is clear, accessible and not unduly burdensome.

“Fairness means allowing freelancers easier access to the market for their services. The Government needs to ensure regulatory barriers, burdens and costs to tendering are reduced, so freelancers can truly compete with larger businesses,” said John Brazier.

John Brazier continued: “Heavy handed and senseless laws weigh business down like a ball and chain. This is even more so with nano-businesses. Every hour spent complying with red tape is an hour not spent productively. We need to free up Britain’s talents to create wealth, not stifle them with top down bureaucracy.”

Elsewhere, PCG is asking that in future all Government departments will have to ensure that 10% of their procurement budgets will go to nano-businesses and that Government departments and their contractors must not discriminate against freelancers who do not have pre-existing security clearance when it chooses which freelancers to award a contract to.

John Brazier concluded: “It is PCG’s fundamental belief that flexibility in the labour market is the key to ensuring Britain’s future economic success.

“The next Government should encourage freelancing as a flexible, innovative and entrepreneurial way of working that enables business to perform more cost-effectively, especially when recovering from recession.

“The start of a new decade provides an opportunity for fresh, innovative thinking.

“We will be continuing to push this message up to the election and beyond.”

Download the Manifesto >>

Working from home?

You are not alone!

We’d love to know how you’re working throughout this week – twitter tag: #workingfromhome

Small businesses and freelancers continue to work remotely during big freeze

Statistics from Gradwell, the internet services provider, show that employees from many small businesses and freelancers have continued to work this week, despite being unable to reach the office.

Despite the snow, stats indicate that between 9am and 10am on the 5th and 6th of January, almost as many phone calls were made as on any other working day of the year.

Gradwell provides small businesses and freelancers with broadband services including Voice over Internet Protocol (VoIP) technology, enabling users to make phone calls over the internet whilst appearing to use a business’s landline number.

Managing Director Peter Gradwell said: “Although our statistics reveal a slight dip in the number of calls in the main businesses have continued to operate as normal despite the snow.” Although there are lots of potential reasons for adopting VoIP technology, including cost reduction, one of the main benefits is the ability to use one number from any location. The advantage of this becomes particularly apparent during bad weather.

Gradwell went on to say that 12 members of his staff were unable to reach the office yesterday, yet all are able to work from home.

“Despite the recession, we’ve seen customer numbers rise dramatically in recent months with over 10,000 SMEs and freelancers now using our services. he increased use of VoIP technology is a trend that I think we’ll see throughout 2010 as broadband access continues to increase and more and more people choose to work flexibly.”

Gradwell is a leading independent provider of Internet communications services, from Internet telephony and broadband, to website hosting and email management, they design flexible service packages, ideally suited to the small business customer.

Image by: -RobW-

A pick of the most popular posts in 2009

Go Freelance: The complete guide to help you start freelancing

Leif Kendall’s awesome guide to Starting Out in Freelancing has been massively popular over the last year. Stay tuned for a 2010 update coming very soon.

Or Download the guide if you’re new to freelancing and want to get started right away.

Employment Advice: Working Hours, Rest Breaks and Holiday Entitlements – Working Time Directive – and Bank Holidays

In 2009 we launched our Workline Employment Section which has a wealth of information from WorklineUK’s Lesley Furber on employment, contracts, parental leave and part-time working rules.

The most popular post, by far, was Working Hours, Rest Breaks and Holiday Entitlements – Working Time Directive – and Bank Holidays

Freelance Coaching: SWOT yourself to success

In February author, coach and trainer Dianne Bown-Wilson showed us how a traditional SWOT analysis can be used as a tool to troubleshoot your freelance business.

Freelance Coaching: SWOT yourself to success

Productivity: Thinking inside the box: A method for focusing on freelance tasks

Some great productivity advice from Mark Kirby. How to use Time Boxing to get your work done.

Thinking inside the box: A method for focusing on freelance tasks

Starting Out: Freelancing Fail: Do you make these 4 freelance mistakes?

When you’re a freelancer, stupidity can be expensive. It’s better to learn from the mistakes of others in order to avoid common pitfalls. Leif Kendall shares a few of the stupid things he’s done (or seen others do) so that you might avoid the same fate.

Freelancing Fail: Do you make these 4 freelance mistakes?

Marketing yourself: Six simple tips for your CV and portfolio

Greg Coley’s post on ‘The Death of the Traditional CV’ was very popular among designers and freelance creatives, giving a Creative Director’sview on how to boost your chances of being interviewed.

Six simple tips for your CV and portfolio

Starting Out: 8 (more) common mistakes

Our Starting Outsection has proved invaluable to thousands of readers this year. This time Laura Spencergives us her take on some guide to common freelance faux pas.

Freelancing FUBARs: 8 common mistakes

What is your status?: Are you an Employee, Self-Employed or a Worker?

More from Lesley Furber this time on how the HMRC decide on your employment status. Fascinating and potentially vital reading if you’re unsure of where you stand with your employers and clients.

Am I an Employee, Self-Employed (Freelance) or a Worker?

Freelance Questions: “How do I set up a Limited Company?”

Setting up a Limited Company is one of the smartest way to get paid for your work. With a Ltd you get to define your brand, own everything you do, run your business in the most tax-efficient way and pitch for work you wouldn’t be able to get as a sole-trader.

Freelance Questions: “How do I set up a Limited Company?”

But don’t worry, nothing else has changed; it’s the same form and the process is secure.

Doing your return online also helps reduce errors, provides automatic calculations and with an on-screen acknowledgment that it’s been received you don’t have to worry. What’s more, its available 24 hours a day, seven days a week, so you can do your return at a time that suits you.

If you’re using HMRC Online Services for the first time, you will have to register for an online account.

For more information go to www.hmrc.gov.uk/vat

For further help, watch the video guide on the basics of VAT at www.businesslink.gov.uk/hmrctaxhelp or you can find it in the Tax Widget on the right-hand side of this pave, just choose ‘VAT: the basics’ from the dropdown.

In this episode:

• Accidental entrepreneurs
• Un-job fairs
• The future of freelancing
• Raising entrepreneurial children

Useful links:

http://barbarawinter.com/

http://joyfullyjobless.com/

Buy the book: Making a Living Without a Job

Transcript

Andy White: This is Freelance Adviser. Welcome to episode 20 of Freelance Adviser, and we’re back with part two of that interview with Barbara J Winter, author of Making A Living Without A Job. After hearing about putting passion into your work and finding the work that you love, we moved on to the future of freelancing.

Now, here in the UK, we’re seeing a lot of people turning to freelancing. I think possibly due to the way the economy’s going at the moment, it’s sort of forcing them into a new reality, if you like. Is this something you’re seeing in the US as well? Is this a trend that’s being mirrored across the pond?

Barbara J Winter: Well, it’s interesting because you would think so. I have been seeing some stories in the New York Times and elsewhere about people who became accidental entrepreneurs. I have heard from a number of people who have been afraid to quit their jobs; who lost their jobs and started their own business. So, we’re seeing a lot of people, who thought that they were just supposed to get a job and stick with it their whole life, who suddenly are really swimming and have no idea what to do next.

But, where we’re seeing a real change in thinking is with the younger generation and I’m finding this quite fascinating: that just in the last – even before we started having huge unemployment numbers here in the US – I’ve been seeing stories about how many college students today say that they intend to start their own business when they graduate. And they’re not taking business classes in college because the curriculum still is really designed to create corporate employees. So, it’s about – going to work for corporation is what the business departments are talking about: not about doing something on your own. So, a lot of kids are starting little businesses in college and, of course, the Internet is a huge contributor to all those things that are going on.

But, kind of slowly and gradually, I’m participating in something that I invented actually. We’ve been having a lot of job fairs around the country and lots of them in Las Vegas because unemployment here has been very, very high. So we have a lot of job fairs where people come – like 5,000 people show up – and there may be employers with 200 job openings. It’s kind of an exercise in futility, but we’re going to be running something in Denver in the spring called an ‘Un-job Fair’, which is going to be a whole day to introduce people to the idea of self-employment. Maybe people who haven’t actually thought about it but – really kind of demystifying some of the things about what it takes and what’s involved and how people can get started without a huge investment and that sort of thing: intellectual capital instead of the old way of pounds and dollars. So, I’m very excited about this and I think we can replicate it in other cities. I think it’s going to open the dialogue a little bit more.

But people have to be ready: this is something you kind of grow into and sometimes that readiness comes from being shown what the possibilities are and helping them see how they have something to contribute. For most of us, there’s a process like I went through where we have ideas, discard them until we really connect with the thing that just makes our heart sing and we’re like, “I’ve got to try this! I just know it’s a good idea!”

Andy: What do you think the future holds? Do you think we’ll all be freelancing in the future?

Barbara: Oh, gosh, I hope so! You know, Tom Peters talked about this years ago, and I thought it was so interesting because what he said was that more and more and more, work was going to look like the movie business and, essentially in the movie business, everybody is self-employed. You just have a couple of hundred people that all get together and build this film and then they disperse and sometimes they work together again on another project. But, he said – Tom Peters said – he thought that large corporations are going to function more that way, where more and more of us would be independent contractors and we would work on projects and then move on and work on other projects and that sort of thing.

It’s still – the percentage of people who are self-employed is still quite small. I tell people, “You’ve got to know, going into this; you’re volunteering to be in a minority and, consequently, don’t expect everyone around you to understand your decision and your choice because a lot of people aren’t even thinking anything like this.” We who came here after – were born after – the second world war have been conditioned to think about working for somebody else, not ourselves. But it gets easier every day. And it gets easier partly because we have better tools for being self-employed than ever before. I mean, technology has opened astonishing doors for people.

But even more importantly, as more and more of us are doing it and sharing what we’ve learned with other people, it gets easier and easier. I did a – we have an organisation here called Junior Achievement, which theoretically teaches kids about free enterprise, although it has evolved from the entrepreneurial organisation that once was. They go into schools and talk to kids about having their own business. I was a volunteer and taught a group of fourth graders – so, kids who were about ten years old – about – for six weeks I went in for about an hour a week and talked to them about what it meant to have your own business. And the first day I asked the kids – told them what I did – and said that I had my own business but I don’t have a store; I don’t even have an office, I work at home; I travel a lot with my business and told them about it. And then I asked the kids, “How many of you know anyone – do any of you know anyone who has a home-based business?” About two thirds of them raised their hand. I thought, ten years ago we wouldn’t have seen that response. I thought, that is so powerful because if you grow up seeing this, it doesn’t become – it doesn’t seem like such an oddity.

I think that more and more people are thinking about the impact of their own work on their children’s lives and whether or not they’re setting an example of doing joyful work for their children or if they’re sending the message that work is a drag but you’ve got to do it anyway.

So, there are a lot of factors, I think, that are coming into changing this, but in the meantime, those of us who are joyfully jobless are having such a good time that we’re just not paying much attention to all these things that people are wringing their hands over.

Andy: What are you working on now? Can you tell us a little bit about your various coachings that you do?

Barbara: Well, I am working primarily on special events. I think that’s my favourite thing to do: is to really work with people over a two, three-day period. One of the things I got really fascinated by – even though it’s something that comes very naturally to me, but… – something I got very interested in a couple of years ago was using storytelling to market our businesses. What really jarred me was looking at peoples’ websites and looking at how boring most of the bios were of the people running the website. I thought, most people don’t know how to tell their own story and they don’t even know what the best stories are. So, I started doing a three-day event called Compelling Storytelling, which has been wonderful fun.

Then I started a new event this year that – we ended up doing it three times because it was so incredibly powerful – called Follow Through Camp. The purpose of Follow Through Camp was for people to come with a project that they really wanted to get to but had been procrastinating about and to really develop a plan with witnesses of what they were going to do next. And so – and also, just give people tools for, ‘how do you bring an idea out of your head into real life?’ A whole process for doing that. So, I’m working on both those things but, the thing that’s really been calling to me: I do a seminar called How To Support Your Wanderlust, which is about how to create a portable business. It came out of my experience and my desire to travel and also get paid to do it instead of paying to do it. So, I’m really working on developing the How To Support Your Wanderlust thing and I think that’s going to be a big focus of mine next year.

I’m working on gathering all the things I’ve written on that subject and might do an e-book, might do an actual book, for all I know. And then the storytelling, so… Kind of those two things are really high on my list. And then the un-job fair that I mentioned before about introducing people to the joyfully jobless world.

Andy: You do some online seminars as well, don’t you Barbara?

Barbara: I do. I do teleclasses and how I even got into that is kind of funny. I was participating in a seminar with Barbara Sher – who’s a very popular writer and teacher here in the US – and we had this four day event in Colorado and at the end of the event, Barbara was going round the room asking everybody what they were going to do when they got home from the seminar and completely out-of-the-blue; without any premeditation, I said, “I’m going to do my first teleclass and it’s going to be How To Support Your Wanderlust.” We had a lot of people in the class that said they wanted to travel. At that time, I had never taken a teleclass and I had no idea how you ran one, but I had 65 witnesses, so I was committed!

I was very nervous about it because I love to be in a room full of people and, you know: just have that interaction and see people’s body language and have all that fluidity that you have in a room and I just thought, I can’t imagine just sitting on the phone giving out information. But I discovered that I really enjoyed doing it and I also was astonished that I could just be sitting on my couch and really comfortable and making money! So, it had a lot advantages and then about – I don’t know: sometime last – this year, we started recording the teleclasses, which is wonderful for people who – because I do them early evening in Las Vegas, which is, in your part of the world, the middle of the night – and I would have people who would stay up until one o’clock in the morning to be on a teleclass, but now they don’t have to: they can register and get the audio download the next day. They can have the information even if they can’t show up in person. That’s worked out really, really well and also had made it possible for people who wanted the information. And I do things that aren’t the same things I do in a classroom setting or a meeting room setting, so. It’s just added another whole dimension to what I do.

Andy: So, if UK freelancers would like a flavour of your seminars I guess they need to go to the website and register. Is that right?

Barbara: Exactly. They can go to joyfullyjobless.com. They can sign up for my email list. I schedule teleclasses usually two or three weeks out before I do them. I look at my calendar and say, “Oh yes, I’m going to be home for a couple of days. Let’s throw some in.” And so the best way to find out about the classes is to be on my email list because they don’t get announced very far in advance. The emailings also have resources and articles that are useful to people who are making a living without a job. That’s a good starting point.

They can also look on my website for the audio downloads of classes that have already been done but are available. That’s another option.

Andy: Now, Barbara: the best question is always at the end. What’s the one question that you never get asked that you’d love to answer?

Barbara: You know, I’ve been thinking about this a lot. I would say, the question nobody ever asks me is, how can I raise entrepreneurial children?

Andy: Ah!

Barbara: I would love to get in that conversation with parents. And nobody has ever asked me that.

Andy: Well, I’ll ask you now if you want! How do you raise entrepreneurial children? It’s a good question!

Barbara: I started my first business when my daughter was five and went off to kindergarten and I was really clear about the fact that I wanted her to see me working joyfully. So, I involved her in my business as much as I could, like, if I was sending out a newsletter, she would help me put the labels and the stamps on. Sometimes, if I was doing a talk, I would bring her along so she could see me talking in public. It was just a kind of integral part of our life and I ran my business from home, her father ran his business from home, so she just saw that happening. And when she was in college – and I wrote about this in my book – she called me up, I think by her third year of college saying, “You’ve ruined me. All my friends are going on job interviews and writing their resumes and I can’t do that.”

I said, “Well, I know: I did that on purpose.” She went through this kind of conflict because her vision of going to college was to go learn things; not learn to work for somebody else. She was out of sync with her classmates. But, it’s all paid off and now I have a granddaughter who’s five and I’ve written an article about a little business that Zoë started a few months ago doing books: she writes stories and illustrates them and then we sell them. That has been quite a hilarious operation.

But it really is so interesting to see how Zoë already thinks entrepreneurially and she’s only five years old. I was visiting them around Halloween and they were going to have a garage sale. Zoë got busy cleaning out her toys and clothes she’d outgrown, and got them in a big pile and got them all ready. Last week, I asked her how the garage sale had gone and she said, “I made $39,” then she told me what she had bought with it. I talked to my daughter afterwards. She said, “No, she actually made twice as much,” but half the money got put away for her to buy Christmas presents, so Zoë was only thinking of this $39.

It’s very interesting because this is one of the big, big changes of learning to think like an entrepreneur and not an employee. An employee, if you talk about – here’s a good example, Andy let’s take a trip to Las Vegas. An employee will look in their bank balance and say, “I can’t afford to do this right now.” An entrepreneur will say, “That is a fabulous idea! What can I do to finance this project?” So it’s a very different thing, and Zoë – who at the age of five – already understands that. She sees a real connection between the work that she does and the money she generates and the goals that she has for herself. That’s just thrilling to me that she’s growing up with that; that kind of thinking. She’s not going to have to un-learn all the junk that most of her elders had to un-learn in order to succeed.

Andy: It’s a wonderful story.

Barbara: But I’d like to that happen in more families.

Andy: Yes.

Barbara: I have a guy who does my CD production and he – originally I met him when he worked for a large company and then he went to a smaller company and then finally, he went out on his own. When he called to tell me he was on his own and hoped to have my business still, I said, “Do you have a studio?” He said, “Well I’m working at home.” I said, “Do you realise what an impact that’s going to have on your kids?” And I remember one day he was going to deliver some – an order to me – and he said that, “We’re on our way to the pizza place.” He had his kids with him, and I was like, this is so wonderful! The accidental role model I call him. And I think as more adults become entrepreneurial and are doing it with a sense of joy, it’s going – we’re going to have a whole generation of kids who just assume that work and pleasure are – can be one in the same, which is completely opposite of the message I got about work growing up.

Andy: Well, Barbara, it’s been fantastic talking with you. Just before we sign off, where can people go to find out about you on the Internet?

Barbara: Joyfullyjobless.com.

Andy: And where can people get the book from?

Barbara: I think you can get it from Amazon UK.

Andy: I think you’re right actually.

Barbara: I had a letter – an email – from someone in Amsterdam a few weeks ago, and I asked her where she’d got it and she said she had got it from there and I meant to check and I didn’t unfortunately. But I also – if that isn’t true – you can also order it from my website and I will personally autograph it and send a copy out to you. It costs a little bit more because of shipping but, it – we will find a way to get this wonderful book in people’s hands.

Andy: That’s a terrific offer. Now that’s – I think that’s at www.barbarawinter.com I believe, isn’t it?

Barbara: Well, joyfully jobless is my newer website; barbarawinter.com is just my original website and there isn’t much on that website. Joyfullyjobless.com is where all the good stuff is –

Andy: Okay, so that’s where people need to go to get your book is it, if they want a signed copy?

Barbara: Either one, yes.

Andy: Fantastic. Well, Barbara Winter, author of Making A Living Without A Job, thank you very, very much indeed.

Barbara: Thank you, thank you.

No surprises from the Bank of England this week, as once again the base rate was kept at 0.50%.

This follows closely on the heels of the pre-budget report where it was announced that the temporary stamp duty holiday, which increased the threshold from £125,000 to £175,000, would finish as planned at the end of the year.

Activity in the housing market has increased markedly since reaching a trough in January when just 23,000 home loans were advanced during the month.

A total of 55,300 mortgages were granted by lenders in October, the highest number since December 2007, the Council of Mortgage Lenders (CML) said today.

The CML’s director general, Michael Coogan, said we were witnessing “a two-speed mortgage market”. “It appears that low interest rates for those with substantial deposits, coupled with this year’s sustained increases in house prices, are encouraging more people to buy or move home.

“But the same low interest rates that are driving house purchase activity provide little incentive for borrowers to refinance their loans. This, coupled with ongoing tightness in lending criteria, continues to hold back the remortgage market.”

The value of first-time buyer loans dropped by 4% on September’s figure to £2.2bn, but was up 29% on last October’s figure, reflecting rising house prices and an increased willingness by lenders to offer higher loan-to-value mortgages.

Linked to this increase in higher loan to value mortgages is a greater readiness by lenders to accept contracting income as lower risk than before. Tighter lending policy for employees has been offset by more lenders willing to look at contract income as a viable option for mortgage applications — providing certain conditions are met.

Utilising a specialist whole of market Contractor specific mortgage broker can help to take advantage of the competitive funding options on offer, and navigate the conditions that lenders ask contractors to meet for a successful mortgage offer.

by Taj Kang, Associate Director, Contractor Mortgages Made Easy

Freelance Advisor recommends:

• Contractor Mortgages Made Easy
• Freelancer Mortgages Made Easy

By going limited you can:

• save tax
• open more avenues for employment
• benefit from limited liability if you get into trouble

If you’d like to test the different legal structures through which you can earn more money for your time and how you can get tax savings by going Limited our partners Crunch can give you a free accountancy health-check.

If you call Crunch today you will get to chat to experts who can look at your current setup and earning and help you compare the different methods so you can see which option is best for you.

Call 0844 500 8000 (Monday-Friday)

The call will only takes 5 minutes of your time, all they need is your estimated annual earnings (turnover) and an idea of your expenses (they can help you with that too).

In return you’ll receive an email from Crunch with a clear, plain-English breakdown of which option is best for you.

Main consequences for Contractors

National Insurance Contributions (Nics):

National insurance will rise by a further 0.5% in April 2011 on top of the already proposed 0.5% increase mentioned in the April 2009 budget. Both increases will only begin in April 2011. This will especially affect any contractor who pays themselves a salary above approximately £15,000 (especially those contractors caught by IR35) who will see a 1% increase in their employee Nics and 1% increase in their employer Nics.

Note that the level at which individuals will start paying national insurance will also rise by £570, which Alistair Darling said would compensate 15 million people on low incomes. Remember that dividends and pension contributions do not incur any Nics now or post the Pre-Budget Review, but timing is important with regards to paying dividends (see below) as well as pension contributions, which should be made prior to your company year end. Paying employer gross contributions into your pension is still a very tax efficient way of extracting monies from your company.

Income Tax:

The PBR kept income tax thresholds (together with other tax thresholds) the same for April 2010 as they are this tax year. Remember though that the Budget of April 2009, it stated that from 6th April 2010, a new 50% income tax rate comes into effect for anyone earning £150,000 or more. A new top rate dividend tax of 42.5% will also apply above this threshold. However, alongside the new tax band, several other unpleasant tax increases also come into play for those earning £100,000 or more. If you are intending to draw large amounts of monies in the form of dividends in the near future, you may consider doing this prior to April 2010.

If your income exceeds £100,000, the basic personal allowance will be withdrawn at the rate of £1 for each £2 your income exceeds £100,000. Given that the personal income tax allowances will remain at their present level (of £6,475), you will lose your allowance completely when your income exceeds £112,950. As you will be taxed at 40% on income between £100,000 and £112,950, whilst progressively losing your personal allowance, the marginal tax rate in this banding can be up to 60%.

Inheritance tax – Nil rate band:

The inheritance tax (IHT) nil rate band will remain at £325,000 for 2010/11, instead of rising to £350,000 as legislated for in the Finance Act 2007.

Anti-avoidance measures were announced that are aimed at certain trust-based schemes which were designed to reduce or eliminate the value on which IHT is charged on transfers. The measures apply from 9 December 2009. Any allowances or tax bands that do not rise year on year are in effect stealth taxes. If you are caught by IHT, speak to an independent financial planner as well as a specialist Will writer who is a member of the Institute of Professional Will Writers.

Pensions:

Tax relief on pensions will be reduced for people earning more than £130,000 a year from April 2011. The rules that currently limit pension contributions tax relief (‘anti-forestalling’) have been changed with immediate effect; the revisions include a new income threshold of £130,000, reduced down from £150,000. The anti-forestalling rules do affect contractors whose relevant income is above £130,000 (which includes salary, dividends and other forms of income).

It is important to note that this level of income can be income earned in this tax year or any of the previous two tax years. If you think that you are caught by these rules or would like clarification given your personal circumstances, you should absolutely get advice from an authorised independent financial adviser as the rules are extremely complicated.

Capital Gains Tax (CGT):

Good news that the rate of capital gains tax will remain at 18% together with the individual allowance of £10,100. If you have any disposals to make from assets subject to CGT, it is important to be sure of the timing of such disposals and to use any other allowances available.

Stamp Duty Land Tax (SDLT):

The Government has confirmed the ending on 31 December 2009 of the temporary increase to £175,000 of the zero rate threshold for residential property. The threshold will fall back to £125,000 or £150,000 for disadvantaged areas.

VAT:

The standard rate of VAT will return to 17.5% from 1st January 2010.

Corporation Tax:

Good news for contractors operating through a limited company – The Small Companies’ Tax Rate of corporation tax remains at 21% for the 2010-11 tax year, deferring the increase to 22% until 1st April 2011. Remember that you can reduce your corporation tax bill by making any relevant employer gross pension contributions which are normally classed as an allowable expense to your business.

Income Shifting:

There was not mention of this in the PBR, which has to be a good thing for contractors operating under a limited company. Income shifting is the moving of income from one member of a couple, who pays tax at a higher rate, to the other who pays either no tax or a lower rate. Although this issue may be off the radar of the government and HMRC at present, it could re-arise in the future. Be sure to speak to your accountant if this affects you.

Offshore clampdown:

Taxpayers who open offshore bank accounts in certain jurisdictions will be required to report them to HMRC. A range of anti-tax avoidance measures have been announced with immediate effect.

Comments and economic overview

Borrowing will hit £178 billion this year as the recession hammers the public finances, Chancellor Alistair Darling has said. The 2009/10 estimate — equivalent to 12.6 per cent of the country’s entire output — is higher than the £175 billion forecast in April’s Budget, although below the predictions of many experts. The Chancellor took great pride in maintaining his central annual GDP forecast of 1.25% for 2010, and 3.5% for 2011 and 2012, but quickly sidestepped his huge forecast error for 2009, revising his Budget 2009 forecast from minus 3.5% to minus 4.75%, expecting growth to resume by the fourth quarter. We must not forget that the UK is still technically in recession, the longest on record.

Once again, the Chancellor chose to announce a whole host of populist measures which do little to bring public finances back under control. As expected, Darling announced the introduction of a temporary windfall tax on the payouts of bonuses by banks of more than £25,000. A 50% levy will be paid by banks before bankers pay the additional usual taxes which is expected to net the Treasury c. £550 million. From an economic perspective, the PBR’s measures are fairly neutral. More support for lower income families may help boost consumption at the margin, but the re-instatement of VAT at 17.5% and the new 50% top rate of tax are likely to offset most of the gains. Increases to National Insurance for both employers and employees will be a full 1% for both come April 2011 given the original 0.5% rise suggested in April 2009 and the further rise of 0.5% in the PBR. This is set to net the government and extra £3-4 billion in revenues.

Overall, we believe that the Chancellor’s forecast for growth is too optimistic for 2011 and beyond. However, that does not mean public finances are beyond saving. Tough choices will have to be made after the next election which will result in higher taxes and lower spending, ultimately leading to lower economic growth. This is clearly an electoral budget report, with all harsh decisions on both spending cuts and tax increases deferred until effectively after the General Election. Whilst no further increase in this year’s public borrowing requirement is some comfort, the forecast path to gradual deficit reduction has been extended, taking longer and reducing more slowly. This has to increase the chances of the UK’s sovereign credit rating being downgraded. In turn, this reinforces the probability that sterling will remain weak and that, in the face of heavy gilt issuance, gilt yields may rise.

The Bank of England (BoE) will have to walk a difficult tightrope next year as the PBR endorsed its forecast of an inflation spike before falling away again. We remain confident that UK interest rates will remain low for most of 2010, but the risk that rising gilt yields and inflation expectations force the Monetary Policy Committee’s hand has probably increased. Weaker sterling will clearly be of benefit to many UK companies with extensive overseas businesses. This, coupled with low short rates, should ensure that the UK equity market remains reasonably well underpinned, although volatility is likely to rise not least because the electoral battle lines have now been well drawn. The market may well be buffeted in response to every opinion poll movement in the next six months. It is clear that there is no immediate clampdown on spending or increase in taxation, but after the election there will have to be significant further austerity measures. These will fall on all, but the PBR highlighted a clear intention that the majority of tax increases will be aimed at higher earners. This is unlikely to be positive for attracting inward investment or for the City of London, but reinforces our view that the UK economy will remain very sluggish over 2010/11 and hence interest rates will remain low.

Summary

There are a number of changes that have been introduced in the pre-budget report and the main changes will come into effect in the next 12-18 months. Every contractor’s personal financial circumstances are unique and as such, we would always recommend that you get professional advice to see how you can potentially benefit from current and future amendments to tax changes. In order to mitigate tax legitimately, it is important to get advice from both a qualified accountant and an independent financial adviser.

If there is a change of Government after the election, some of the announcements in the PBR may be revised or dropped. However, given the Conservative Party’s forceful views on the urgency of reducing the Government deficit, many of the tax raising measures might well survive. The proposals detailed in the Pre-Budget review are in any event subject to amendment before the Finance Act is passed.

The Financial Services Authority does not regulate will writing, school fees planning, taxation and trust advice, and some aspects of buy to let mortgages, overseas mortgages and commercial mortgages.

The content of this blog post is for general information only and is based on our understanding of current legislation and HM Revenue & Customs practice, which is subject to change. It should not be relied on and action which could affect your personal finances and your business should not be taken without professional advice. Please contact an independent financial adviser for specific advice.

Wealth Matters Ltd is authorised and regulated by the Financial Services Authority. We are entered on the FSA register No. 300635 at www.fsa.gov.uk/register/ Registered in England No. 3862593

Image by hmtreasury

So you have clients, you are making money, you have a diverse work/client portfolio and you are incredibly busy. Working freelance is 24/7, 365 days a year; you never really ‘clock out’ mentally and sometimes even physically.

It is incredibly easy to feel and actually be busy. But the real question is ‘does busyness equate to efficiency and improved profitability for the freelancer?’ A couple of years ago I decided to find out more about my own situation and ask this very question. I made a conscious effort to audit my clients – how much time/attention I spent with them paid and unpaid, how much work (in monies and referrals) was commissioned, and what was my ‘real rates’ client by client.

Now let me just state a caveat because I know this will come back to me. I know that sometimes we have to do a little ‘smoozing’ of clients (old, new and prospective). You know — little titbits of information, an extra freebie of some time, a short lunchtime sandwich to catch up and exchange ideas. But there should always be a limit, and lets face it some clients think that you have become their sounding board, their ideas person, their advisor and all unpaid.

Remember: Your time is money

Some clients are not always equal in value to either the growth of your business or the daily operational running of your busy. It is important as a freelancer to know where to spend you time and with whom for the greatest returns to your business in the short, medium and long term.

This process of working out the greatest return on invested time for clients has become a key procedure for me as a freelancer on a yearly basis. Each year I list all clients and audit them — you can do this in April after the financial year end or January is also a great time to do a stocktake and re-focusing of your core business. I use the outcomes as evidence to drive my business forward for the following year making sure that I spend my time and effort as wisely as possible.

I also allocate what I call the time/investment/return ratio – don’t worry it is not a mathematical equation but a ‘best guesstimate’ on how much time I spend on a client such as reading reports, emails, going to meetings, etc and doing commissioned work, and how much money I actually made from them.

A couple of years ago I realised that I was spending time doing work every week (small things) for a particular client but that they had on average only commissioned £800 a year over a 3 year period. The return was poor and also there had been no referrals for other work. I suppose I had spent too much time cultivating the ‘big project’ from that client. However, another client that I had had only two meetings with and a couple of emails (around 8 hours work) over a 3 year period had commissioned over £18,000 of work, and yet I had invested little in the relationship with that client. I began to question, had I been barking up the wrong tree for opportunities for developing the long term growth of the business and not maximising my time on paid work.

Finding data to support your instincts

There is no magic equation or science and sometimes working as a freelancer is purely based on instinct and gut feeling. However, I find that I do require some hard data buried within my business to help me focus on the clients that potentially have a higher value for my business in the long term.

I find using some of these pointers helps me focus on what customers or clients perhaps are important to me. It may be an interesting process for you to go through also.

7 pointers to help you troubleshoot your troublesome clients

1. List all you clients
2. List all the money you made from them over a 1 year period
3. What type of work are they commissioning?
4. How much time do you spend on this client, include
   • Emails
   • Advice they ask for
   • Dropping by the office for chat
   • Having a quick chat over lunch
   • Preparing briefs for work that never really materialises
5. Think short, medium and long term and think carefully when it is the right time to go that extra mile for a client. But if it done on a regular basis with poor returns on monies or referrals then reconsider.
6. If the financial return on time invested is low, then start setting a lower priority for that client.
   • Don’t always be available for quick chat over lunch
   • Don’t make their emails a priority
   • Push the point that you can’t talk/drop by just now as you are working on commissioned projects
7. If a customer really thinks that you are invaluable to their organisation then they will pay for your services.

By Joanna Ptolomey – a freelance information consultant and author of Taking charge of your career: a guide for library and information professionals

Image by pshutterbug

Contact Joanna:

info@joannaptolomey.co.uk or follow on Twitter @chibbie

In this episode:

• Personal development and self-employment
• Building businesses limited only by our vision
• How traditional employment stifles exploration
• Finding the essence of what you want to do

Useful links:

Buy the book: Making a Living Without a Job

Transcript

So, we’re talking to Barbara Winter who’s the author of Making a Living without a Job. Barbara, thank you so much for coming on to Freelance Adviser.

Barbara Winter: My pleasure.

Andy White: And, I’m reliably informed, that your book – the first edition – went into, was it, eighteen printings?

Barbara Winter: It never went out of print, which was a huge astonishment to me. It was in print for sixteen years, even though when I wrote it – the first time I wrote it on a typewriter, if anyone remembers what a typewriter was –

Andy White: I remember.

Barbara Winter: – and there was no Internet: none of the things that are just basic tools to freelancers today even existed. And that’s an even greater astonishment to me, how things have changed in such a short period of time.

So, finally, my publisher said, “Maybe we should update?” And I thought that was a fine idea and so the new edition came out the end of August.

Andy White: And it’s already in its second printing, isn’t it?

Barbara Winter: It went into its second printing after five weeks. That was another lovely surprise.

Andy White: It’s incredible. Now, I grew up on things like Think and Grow Rich, Napoleon Hill; The Magic of Thinking Big, David Schwartz… And as I read your book – which I absolutely love, by the way – I noticed that you grew up on the same sort of things as I did.

Barbara Winter: You know, I think there’s a really strong connection even though I don’t see many people talking about it; between the interest in personal growth and development and the interest in self-employment. And I first started to realise that, during what I call my Self Help Junky Days, when I was reading all those books and going to personal growth seminars and really seeking to find out more about myself and what I could become; and I noticed that how often the conversation at seminars in the hallways kind of went to the idea of doing something on their own.

Now I think what this really is, is a reflection of when we are on this quest or journey, at some point we have to stop reading the books and build a laboratory for ourselves so we can test those ideas. And traditional employment hasn’t always been a welcoming laboratory for exploration. So, we kind of come in through the back door, and those two things are very linked together and I also now think that people who ignore that piece of the puzzle often are not especially successful in their business. Because the books you’re talking about are talking about personal success and really developing a philosophy and also a vision of what that looks like.

To each of us, that – here in America – and this is something that’s really starting to change – we have had what is called The American Dream, which is kind of a vision that has been imposed on us: “This is what you’re supposed to want. This is what success looks like here.” I think a lot of people who have created businesses like mine – which is much closer to a freelance business than a conventional building a business with real estate and a fixed location and all of those kinds of things – many of us realise that this is a really important piece of the puzzle that we can only go – we can only grow a business as big as our own vision. It’s an extension of who we are and how we think. And if we are crippled by limiting thinking about our own potential and possibilities, our business is going to reflect that.

So, the two things are very, very compatible and people who simply go at it from a left-brained approach, trying to find the formula and follow the steps, usually end up with a pretty mediocre operation.

Andy White: The thing I really enjoyed about your book was that it brings that sort of – I don’t really want to use the word old-fashioned – but that view that we were – we got from reading books like Think And Grow Rich, and it sort of brought it up-to-date. Your book is very pragmatic and down-to-earth. I was wondering, actually, what made you make the leap? What’s your early story?

Barbara Winter: Well, it wasn’t a leap: it was a crawl; I think would be a better way describe it! It was a very slow – it feels like it was a slow process to me, but when I look back, it really happened over a fairly short period of time. I grew up having no idea of what I wanted to do because there were so many things that seemed exciting to me. That was also very disconcerting to me because I have a sister who’s two years younger than I who knew from the time she was in eighth grade, so however old that was – fourteen – that she wanted to be an archaeologist. And I just watched her walk straight down that road, and I was zigzagging all over the place and every week I wanted to be something different.

And when I went to college, I was surprised because I thought I’d just kind of hang out in college and then I would be an adult by the time I graduated and then I would surely know what I wanted to do with my life. I was surprised they wouldn’t let me enroll unless I declared a major and so, on the spot, I said without any kind of thinking much behind it, that I would be and English major. So, I got a degree in literature and speech, then along the way acquired a teaching credential, so I taught high school English and speech for five years and loved it for the first two years and then really started to get bored with it.

I was teaching in a school where there were a lot of people who’d been there for decades teaching and I could see that they were just… phoning it in… and I was terrified by that. I thought, if I stay here, that’s going to be me. So, about this time, when I am in the midst of all this turmoil, is when these books that you mentioned started to come into my life and a man who became my mentor started introducing me to this whole world of personal growth and development that I’d never ever heard anything about. I also couldn’t understand why I hadn’t learned some of these things in all the years I’d been in schools, so that was the beginning of the winter of my discontent, I would say.

So I left teaching and tried to figure out what to do next but I wasn’t getting very far. I ended up going to an employment service looking for a job and the job that I got by doing that was that the employment service hired me to be a job counsellor. So, the irony of this is really hilarious to me now: that, I don’t know how to figure out what I’m going to do but I know I’m getting paid to counsel other people. But in a way I see how this was such a valuable piece of my own life puzzle, because all day every day, all I did was talk to people about work. I realised that almost nobody knew how to figure out what they should be doing and that there had been much too much emphasis on working as a means to get money, but nothing else. So, people didn’t know what they had to offer; they didn’t even know how to figure it out, much less, how that could become their livelihood.

So, all these perplexing things started to stir up more discontent in me. And then I left teaching – or I left the employment service – and my daughter was born and the first couple of years I was a stay-at-home mum, but that’s when I really began my own personal growth journey and started reading books and exploring on my own.

And then I got a third job, which was a crazy one, really crazy: without any training or experience I became an interior decorator in a real high-end furniture store. It was during that time I read an article about two women from New York who had started their own business and they had started it in their apartment. It was a personal service business, kind of just doing projects, creative projects. It was the first time I realised that a business could be something other than a store and that you could create something that was an extension of who you were and what you were good at doing. That book really changed my life: it was called Supergirls: The Autobiography of an Outrageous Business. I probably read it six times in a row.

Andy White: Yes, that became your working text, didn’t it, more or less?

Barbara Winter: It was just profound! It’s been out of print for years and years and I understand now in London, you can get out of print books printed in minutes, and I keep thinking I should send everyone there to get their own copy of Supergirls because you can’t buy it anymore. I think that their experience still was just a – really useful to me. By this time I decided that that was it: that was what I wanted. I wanted to have my own business, but I had no idea what that was going to look like.

We moved from the small town in southern Minnesota where I had grown up to a small town outside of Madison, Wisconsin. And I thought, “This is it. This is my opportunity. I’m in a new place, nobody knows who I am. I’m going to start my own business, and if it’s a dreadful failure, nobody will know, because I’m here kind of anonymously.” So, the day my daughter went off to kindergarten, I set up a card table and a typewriter in my TV room and I started a business called The Successful Woman. And I had had this idea that finally came to me after pondering for months what this business would be, to take all this personal growth stuff that I had been learning and using in my own life and put it into a context for women; because at that time, all the book and programmes were written by men for men. The women’s movement was starting to catch fire and they were talking about very different things than the things I was learning and I thought, “I think there’s an audience for this.”

I also decided at that time to start publishing a newsletter, because I knew in my own life I needed a lot of reminders and encouragement. I thought a newsletter would be just perfect, you know? You read a book and I had that experience, certainly, with reading personal growth books, that I would be just so confident as I was reading them but when I would finish the book, I would start backsliding. I realised reinforcement was a really important part of mastering anything. So, I just started out and Supergirls became my handbook and if I would get stuck and think, “Well, how do I do this?” I would see what Supergirls had done and then adapt it to my own situation. It was astonishing how quickly things took off. Once that happened, I knew there was no turning back.

So, that was kind of – that was a long answer to your short question.

Andy White: You mention in your book quite a lot – especially in the section on finding your passion – to try and find the essence of your passion rather than a specific role that you might want to do. Now, a lot of people listening to this podcast are freelancers or contractors, so they’re already doing something. I’m wondering what advice you’d give to quite new freelancers and contractors that maybe haven’t quite found their role or are looking – maybe they’re wondering if they’re doing the right thing. What advice would you give them?

Barbara Winter: You know, that was also a huge learning for me: learning the difference between essence and form. Essence really starts by becoming aware of when you feel the most creative and the most powerful and the most inspired, and what are the situations that lead you to feel that way. So, finding the essence often is about looking for the intangible quality.

For instance, one day I was doing something very mundane, like baking cookies, and I suddenly had this revelation, which – I mean it’s really funny to me that it was such a startling epiphany – and I realised I’m happiest when I’m making things. But the second part of that epiphany was, it doesn’t much matter what I’m making. It’s the act of being creative that really enchants me. So, writing an article or baking cookies both give me satisfaction even though they’re very, very different kinds of activities. So, as we can identify those kinds of things that really enhance what we’re doing, all of sudden, the possibility starts to explode because it goes way beyond just a single way of making that happen. And we realise, for instance, that we – the essence of what I love to do is help other people. Or the essence of what I love to do is inspire other people. Or the essence of what I love to do is teach other people. And then we can start asking ourselves the question, “How many different arenas can I create for doing that?”

So, it’s a really important part of the process and it takes us away from that singular thinking that is how we often go about thinking about careers because that’s what we’ve been taught to do: to pick that thing. If we instead go for the essence then we realise, “Oh my goodness. This really opens up the world for me.”

Andy White: Your book has lots of stories in: that’s one of the reasons I like it so much. What would you say is your favourite success story, Barbara, from your book?

Barbara Winter: Oh my goodness! You know, somebody just asked me that and I hear so many good ones. In fact, I think that that is perhaps the biggest pleasure of what I do I do: is that, I get to share people’s stories and they tell me about all the changes that have come about in their lives because something I said or wrote that was helpful to them.

But, I’ll tell you one of my favourite stories, about a guy named Al who called me up one day. He had taken my Making A Living Without a Job seminar in Minneapolis and he said he was starting a handy man business. He had some questions about insurance and bonding and things like that and then he said, “I want to tell you how this all happened.” He said, “I graduated from college, my parents insisted I get a real job. I got a job working in a computer chip manufacturing company” – I think in administration or management, or something like that: he wasn’t working in a factory. He said, “I was very unhappy there and I was afraid I was going to be stuck there for the rest of my life and so I started taking career assessment tests.”

He said, “I took every test ever invented. I worked with career counsellors trying to figure out what it was, what I should be doing with my life.” And he said, “While this was going on – while I was out there looking for ‘it’ – I remodelled my house three times.” And I said, “Oh! Kind of hiding in plain sight, huh, Alan?” And he said, “Yes. I realised that I really love to do projects that have a beginning, a middle and an end.”

The he went on to talk about how in any job he’d ever had, he’d never felt so appreciated as he did now with his customers who entrusted him with their houses. Besides the fact that he just loved doing the work, he also got paid on top of that. I just love Al’s story because I think that – it certainly has been true here in the US and I know it’s true also in the UK – there has been a lot of snobbery around careers and that there are like good careers, or ones where you didn’t sweat, and bad careers, or ones where you had to be physically engaged. And so, I think that stories like Al’s really get me excited because it’s about being authentic and true to yourself and not listening to all that conversation around good and bad work. It’s only good work if it makes you joyful to do it.

Andy White: It’s work you’ve got to be passionate about, isn’t it?

Barbara Winter: Exactly. And you know, it’s interesting to me now, Andy, that so many writers and seminar leaders talk about passion because when I started doing my Making A Living Without a Job seminars over twenty years ago, I had people who would say to me at the end of it, “I never heard anyone use the words work and passion in the same sentence.” Now, we throw it around and that makes me nervous: it’s like the first time we hear Joseph Campbell say, “Follow your bliss,” we all gasped. Then it became such a mantra and was used so often that it took away the power of it. I feel the same way about talking about passion is that it’s become denuded because it’s become thrown around so much.

But we’re really thoughtful about what that means, all of us know when we are working with passion and when we’re not. If we allow ourselves to spend our lives working in ways that do not generate that feeling of excitement within us – and I think also passion brings with it curiosity to go farther and attain more mastery – it’s kind of got a built-in catalyst there. If we don’t make that our quest, to find the work that we’re passionate about, we never can really fully maximise our potential. We’ll only be just okay. We won’t be fabulous.

Andy White: Well, we’ll leave it there for part one of our two-part interview with Barbara Winter. To make sure you don’t miss part two, then go to www.freelanceadviser.co.uk/subscribe or subscribe in iTunes. See you next time.

Useful links:

Buy the book: Making a Living Without a Job

• Accommodation Expenses
• Hotels and Bed & Breakfasts
• Personal Incidental Expenses
• Renting Accommodation
• Staying with Friends or Colleagues
• Bicycle expenses
• Broadband Internet
• Childcare vouchers
• Director’s Salary
• Entertainment Expenses
• Eye Tests
• Home-working Expenses
• Separate business premises within the grounds of the house
• Magazine and Book Expenses
• Mileage Expenses
• Mobile phone expenses
• Subsistence Expenses
• Travel Expenses

Accommodation Expenses

Contractors and freelancers can claim accommodation expenses when working on a contract site, attending interviews or going to meetings. Any expenses must be “wholly and necessarily” required and any “personal use” will be disallowed.

Hotels and Bed & Breakfasts

Contractors and freelancers may have to stay away from their normal place of abode when working on a contract site, attending an interview or meeting in order to gain work for their company or while undertaking business related training. The costs involved can be classed as a business expense. The VAT can also be reclaimed.

Personal Incidental Expenses

A director/employee can also claim £5 a night for Personal Incidental Expenses in the UK and £10 when staying outside the UK. This is designed to cover the costs of laundry, newspapers, phone calls home from public phones and so on.

Renting Accommodation

If renting accommodation is a reasonable and cost effective alternative to staying in a Hotel or B&B, then these costs can classed as a business expense. Freelancers and contractors can also claim the associated costs of the utilities at the rented accommodation and Personal Incidental Expenses. The contract for the rental of the property should be in the name of the employer or the Limited Company.

Staying with Friends or Colleagues

The rules for this are no different to the Renting Accommodation rules as detailed above. The Limited Company should have a contract with the supplier, whether that be a friend/relative or colleague.

Bicycle expenses

Freelancers and contractors who wish to travel the healthier way to work can claim bicycle expenses. In 1999 the ‘Cycle to Work Scheme’ was introduced as part of the sustainable carbon reduction policy. This makes it cheaper for freelancers and contractors to go green!

The bicycle must remain the property of the company and it must be used more than 50% of the time for travel to work. Contractors and freelancers can simply purchase a bicycle plus necessary equipment in the company name and loan it to themselves. The company will benefit from reclaiming the VAT and capital allowances. The director’s salary may remain at a tax efficient level.

Where a worker uses their own bicycle for business travel a mileage allowance of 20p can be claimed.

Broadband Internet

Contractors and freelancers can claim expenses on their Broadband Internet. In order for expenses to fall within the “wholly and necessarily” rules the internet contract must be addressed and invoiced to the company. If the Internet is in a personal name, only the business usage may be apportioned as an expense.

Childcare vouchers

Contractors and freelancers can claim childcare vouchers through a Limited Company under the Government childcare voucher scheme. Through the Childcare Voucher Scheme employees are able to receive up to £55 per week (£243 per month) in childcare vouchers. These are exempt from tax and National Insurance Contributions, and are available to each parent and legal guardian.

The scheme can be accessed:

1. By registering through HMRC
2. By using a scheme provider who will carry out registration and administration on your behalf

Conditions of the Childcare Voucher Scheme:

• The child must live with the employee. The scheme is available to each parent or legal guardian.
• The scheme must be offered to all employees, and all must be able to claim expenses.
• Vouchers cover children up to the age of 15 and can only be used to pay registered and approved child carer’s e.g. registered childminders, nurseries, after school clubs, holiday clubs etc. Childcare vouchers cover children up to the 1st September after their 15th birthday or if the child is disabled up to the 1st September after their 16th birthday.
• If a relative is the child carer then they need to registered and also care for other children who are not related
• A Director’s Limited Company may pay the childcare directly and deduct it against profits as an expense. In this case, the childcare contract should be between the Limited Company and the child care provider.

Director’s Salary

Contractors and Freelancers can save tax by choosing the right combination of salary and dividends. A director’s salary is an annual payment made by the company to the Director and is usually paid at monthly intervals.

The gross salary and employers NICs are a deductible expense against the profits made by the Limited Company and so reduce the Corporation Tax payable by the company.

Setting the level of salary is dependent on various factors:

• Working Tax Credits
• Job Seekers Allowance and Other State Benefits
• Earnings from a previous job in the same tax year
• State Pension Entitlement
• Personal or Company Pension Contributions
• Personal Tax Allowance
• National Insurance Contributions

Crunch accountants recommend using a £5,715 salary (based on the National Insurance threshold).

Entertainment Expenses

For contractors and freelancers entertainment expenses are usually disallowed. However in some circumstances Input VAT may be reclaimed.

In order to claim entertainment expenses a distinction must be made between personal and business entertainment. Personal entertainment is not deductible. Business entertainment must not be provided to an employee of the business and must have been free of charge to the recipient.

Expenses that are considered to be business entertainment:

• Provision of food and drink
• Provision of accommodation
• Theatre and concert tickets
• Sporting events and facilities
• Entrance to clubs and nightclubs
• Use of capital assets such as aircrafts and yachts for entertaining

If you are a contractor or freelancer who uses the flat rate scheme you cannot claim Input VAT. However, you may be able to claim subsistence expenses.

Eye Tests

Freelancers and contractors can claim expenses on eye tests.

The HMRC states directors can claim employee expenses on:

• Eye tests that are required by health and safety legislation for employees who are required to use a computer screen or other VDU
• Glasses or contact lenses that you’re obliged to provide because an eye test required by health and safety legislation shows them to be necessary for VDU work – as long as the glasses or lenses are only used for VDU work
• Expenses cannot be claimed on glasses or contact lenses that are used for everyday wear.

Home-working Expenses

Contractors and freelancers who work from home are entitled to claim home-working expenses. There are several different options through which contractors and freelancers can reimburse home expenditure:

Simple Cost

Contractors and freelancers, who work predominantly at their client’s sites and use their home to manage business, keep accounts and search for work, can claim the sum allowance of £156 (the equivalent of £3 per week).

Apportioned Cost

For contractors and freelancers who have a room set aside in their house where more than accounts and paperwork are managed.

Three factors are taken into account when apportioning this expense:

• Area: what proportion in terms of area of the home is used for business purposes? Work out what percentage of house area is used for business.
• Usage: how much is consumed? This is appropriate where there is a metered or measurable supply such as electricity, gas or water.
• Time: how long is it used for business purposes, compared to any other use?

Director owning a property rents some of the use of the property to the Limited Company

For directors of a Limited Company.

The Director of the company calculates the apportionment of the costs as above and charges rent to the company. The rent is shown as income in a self-assessment Tax Return and claims the apportionment of the costs as deductible against income.

In this way a Limited Company gets the same benefits as a sole trader.

NB: Although this method is effective if there are substantial running costs it will complicate your tax return and may result in a challenge from HMRC.

Separate business premises within the grounds of the house

For contractors or freelancers who use an outside office.

The office must be used only for business use and not for any residential use. If there is any residential use, apportionment options must be used.

A separate building used for business exclusively will be an asset for the business and so tax rules for this type of asset will apply. HMRC will view this office as being separate from the main residence and allow tax deductions.

The purchase of the building and installing the building will be a capital asset for the business. Costs can be written off over a number of years. The service costs for getting the building to a useable condition will be allowed as costs against the profits of the Limited Company.

For the running costs then only the costs associated with the office can be claimed.

Magazine and Book Expenses

Freelancers and contractors can claim expenses for certain books and publications required for their business.

HMRC bases its guidance on books and publications expenses on the principle of whether the expense is “reasonably incurred”.

When considering books and publications each expenses item should be considered separately.

Before you claim expenses for books and publications make sure that:

• No-one personally benefits from the item
• That the publication is a necessity for the business and not for self-interest
• Generally, books, newspapers and magazines are zero rated for VAT purposes.

Mileage Expenses

Contractors and Freelancers can save tax by claiming tax-free mileage allowance payments for the costs of their business journeys made in their own vehicle, under the Approved Mileage Allowance Payments Scheme.

Travel should be to a temporary workplace. A ‘temporary workplace’ is a workplace attended by an employee for a limited duration of time or for a temporary purpose (for the director of a Limited Company this is somewhere attended for less than 24 months.)

The approved amount for mileage allowance payments = the number of miles of business travel x the rate applicable to the kind of vehicle

• Car or Van: 40p per mile for first 10,000 miles, 25p per mile after that.
• Motorcycle: all 24p per mile.
• Cycle: all 20p per mile.

Separate calculations are made for each different kind of vehicle.

This tax-deductible expense is beneficial for Freelancers and Contractors who have to travel frequently to a temporary workplace.

Mobile phone expenses

Most freelancers and contractors will use a mobile phone for business and personal use. If you are a freelancer or a contractor you will be interested to know that you can claim expenses on your mobile phone.

You can claim a mobile phone expense as a tax-deductible expense for both purchase and running costs if:

• The mobile is owned by the business
• Invoices are made to that business
• The phone is provided for business use and has “reasonable” personal usage.

More information for freelancers and contractors:

• HMRC do not recognise Pay As You Go top up costs as a tax deductible expense for a limited company.
• Since 2009 Blackberrys, personal assistant devices (PDAs) and iPhones are now classified as mobile phones for the purposes of legislation.
• If a mobile phone is only used for business then all of the input VAT is reclaimable. If there is some personal usage then only an apportioned amount of VAT may be reclaimed. However, this does not apply with the Flat Rate VAT scheme, as there is no input VAT.

Subsistence Expenses

What is Subsistence?

Subsistence expenses are business travel expenses such as meals. If subsistence expenses are incurred while traveling on allowable business journeys, employers are able to make subsistence payments tax and NIC free.

HMRC Advisory rates:

• Breakfast Rate: Up to £5 per day where a worker irregularly leaves home before 6 am and incurs the cost of breakfast.
• One Meal Rate: Up to £5 per day where a worker has been away from their home or normal place of work for at least 5 hours and has incurred the cost of a meal.
• Two Meal Rate: Up to £10 per day where a worker has been away from their home or normal place of work for at least 10 hours and has incurred the cost of a meal.
• Late Evening Meal Rate: Up to £15 per day where a worker irregularly works after 8pm and incurs the cost of a meal.

Travel Expenses

Freelancers and contractors can claim expenses on travel costs. HMRC states that deduction is allowed for the full cost of travel where necessary attendance is required.

‘Necessary attendence’ refers to the journey made to or from a place that has to be attended in order for the performance of duties to be carried out. This does not include ordinary commuting travel (i.e. travel between home and the ordinary workplace) or private travel.

Image by Roo Reynolds

What is a business expense?

A business expense is any expenditure that is “a wholly, exclusively and necessary expense” incurred by the business for its performance of day-to-day duties. There is no duality of purpose for mixed business and personal usage.

What expenses are tax deductible?

• Accountancy (All fees including advice pre company incorporation and accounting software)
• Accommodation – find out more
• Advertising
• Air fares (Exception of 1st class)
• Annual company fee
• Bad debts (Debt 6 months unpaid, VAT needs adding back to output tax if not cash accounting or flat rate scheme)
• Bank charges
• Bicycles and related costs – find out more
• Broadband internet – find out more
• Business gifts (Corporate: Max of £50 in a 12 month period. Food, alcohol and tobacco do not qualify)
• Business start-up (Incorporation fees, VAT, PAYE and CT registration fees, accountancy advice, lawyers advice/contracts drawn up)
• Capital allowances (Depreciation on assets)
• Car hire (Proportionate if there is an element of personal use)
• Childcare vouchers – find out more
• Christmas gifts (Need 2 or more employees other than just Director to qualify. Alcohol, food and tobacco do not qualify)
• Charitable donations
• Clothing (Uniform and not used for personal use)
• Computer equipment (Under the net value of £500)
• Company formation fee
• Conference expenses
• Depreciation (On assets above £500 net value, either straight line or reducing balance)
• Director’s salary – find out more
• Entertainment – find out more
• Eye test – find out more
• Foreign exchange costs (Costs of converting foreign invoiced revenue back to sterling) – find out more
• Health check BUPA and other annual screening check for director or employees
• Hire and rental charges
• Hire purchase (Agreement must be in the company name)
• Home working expenses – find out more
• Insurance (Office contents, Employers liability, Executive income protection, Key man life, Jury service, Motor, Tax investigation, Permanent & private health, Professional indemnity, Public liability)
• Interest on business loans (In company name)
• Key man life insurance
• Leasing rental (In company name)
• Legal costs (Breaches of law and penalty payments are not allowable)
• Magazines and Books – find out more
• Marketing costs
• Medical insurance (Foreign contracts only)
• Medical treatment (Only when on business abroad)
• Mileage – For more information click here
• Mobile telephones – find out more
• Motor vehicles (Company owned, no improvement costs)
• National insurance contributions (Not class 1a)
• Office rental
• Parking (£5 daily for un-receipted)
• Patent costs
• Pensions provided to employees (Seek professional advice from an independent advisor)
• Postage (No VAT reclaimable)
• Professional fees
• Printing
• Property rental (Apportion where private)
• Repairs to equipment
• Salaries and wages
• Software (Incl. accounting software)
• Sponsorship (Allowable when given freely, no VAT needs to be charged)
• Stationery
• Subsistence – find out more
• Taxi fares (‘Adequate’ fares are allowable)
• Telephone (Proportional if not in the business name)
• Training courses (Must be relevant to the nature of the business)
• Training manuals or books (Allowable when specific to business)
• Travel – find out more
• Use of home as office (£3 weekly HMRC approved)

Many of these claims are a tax deductible grey area and require further reading for more specific detail, please see the ‘find out more‘ links and refer to the HMRC website for exact specifications on claims.

Before you go for that great rate….

• Decide your ideal price and the lowest compromise you are willing to settle for.
• Know your strengths and make sure you have facts or quotes to back these up with.
• Find out what other freelancers or contractors are charging.

While you negotiate that great rate….

• Treat yourself as a business

• Ask lots of questions

• Think about the commercial value of the work you are being asked to do

• Work out the ‘time-cost’

• Find out if there will be on-going work

• If the client won’t move on price, try offering less of your services for the reduced rate

• If you decide to go for a ‘set-rate’ be very clear about what that rate includes

• Find out if your work is going to be used in more than one medium e.g. print or online

• Be clear whether you plan to include costs such as travel, meetings or anything else.
• End on a positive note.

After you have bagged yourself a fantastic rate!

Image by DavidDennisPhotos

Opening a Limited Company bank account is easy:

• Shop around for your bank account – don’t just take the convenient route and go with the your current bank as this may not be the best deal.
• Look for banks with a strong reputation to ensure that your money is safe.
• Pay attention to account interest rates as these can hugely vary.
• Go for a bank that has a specialised small business unit. The set up process is likely to be simpler and more informative.
• Check to see if your bank has online banking and if it’s easy to use.
• Set up a business account.

You will need:

1. Your Certificate of Incorporation with limited company name and number.
2. Your passport and/or driving license to prove your identity
3. Recent utility bills and bank statements

Photo by gordasm

Factors affecting rates of pay

Skills and Experience

Location

Economy

Agency Commission

Company Structure

Image by zappowbang / CC BY 2.0

Courageous conversations

How to say what you mean and get what you want

But as a freelancer you’re on your own when it comes to dealing with issues and problems. If and when they need sorting out you’re the one who has to do it and (you know what I’m going to say here, don’t you?) the longer you avoid dealing with things, the worse they get. Not that I’m suggesting you leap on every issue as soon as things run less than smoothly, but  sometime or other you’ll have to do something about those situations that lurk like a worsening toothache.

Don’t just sit there – do something!

The way round  all these concerns lies in improving your ability to undertake courageous conversations – those in which open and positive communication is used to create constructive solutions to difficult issues within the context of a strong and trusting relationship.

Sound great, doesn’t it? And so easy! So why don’t we do it?

Mainly because as well as those fears mentioned above we are held back simply by the terror of jumping off the diving board and getting on with it. Hence the name “courageous conversations” – we need to be brave and fearless if we want results.

Conversations for any situation

In essence, they all share a common basis: they’re causing you tension, that tension is leading to you to feel resentment and possible irrationality, and you want them to change their behaviour.

Rules of engagement

1. Positive intent This means that you have to embark upon the conversation intending to achive a mutually beneficial, positive outcome i.e. a win/win situation where you may get the other party to agree to making some changes, but you co-create the outcome and they don’t lose face or feel diminished or bullied.
2. Outcome You must be clear about exactly how you want their behaviour to change. It’s no good saying “I’d like you to pay your invoices more promptly”. If they never pay anyone within six months, “more promptly” for them might mean four months whereas what you want is payment within 30 days. So be specific.
3. Perspective This is perhaps the most important area of all and reflects the fact that whatever you believe the issue is you are only seeing it from your perspective – the other person may not see it as an issue of any significance whatsoever – and, of course, you may not be seeing the bigger picture.

Candid, challenging and courageous

Conducting the conversation itself involves following a few straightforward rules:

• Forewarn the person that you want to talk to them about the issue. (e.g. I’d like to come and see you on Thursday  to discuss how to improve the timing problem we keep having around your invoice payments”).
• Start the conversation by stating what you believe the issue is and the impact you feel it is having on you and your relationship with them. Be assertive and clear – if not, you risk losing momentum from the start.
• Tell them why the situation matters to you and what you feel are the implications if it is not sorted out.
• Ask them to acknowledge that they’ve understood what you’ve said and for their perspective on the situation. Listen carefully, asking for elaboration or clarification if necessary.
• Tell them what outcome you would like to see, then ask them to suggest a solution that would address your concerns.
• Discuss their proposals using lots of questions and reflecting back what they agree to so you are both clear about what is involved.
• Ask them for their commitment to making the change and stipulate a timescale. Agree with them how you will both know when the change has been made.

By Dianne Bown-Wilson

Image by eye2eye