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How to become a freelancer without creating a company

Last Updated
Tuesday, April 11, 2023
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In the UK, the number of independent freelance consultants is rapidly increasing each year, with 4.1 million solo self-employed people in 2022. Of these, 2.8 million operate as sole traders and 1.9 million as freelancers. Freelancers enjoy the benefits of managing their own careers, choosing their clients and working hours, and having a better work-life balance. However, the administrative and fiscal burdens of freelance work, such as accounting and ancillary costs, can be overwhelming. As a result, many freelancers switch back to full-time employment. But there are many solutions for how to become a freelancer without having to deal with all the red tape.

Being able to manage their own career, choose their own clients and working hours, have a better work/life balance and being able to work from wherever they want, are just some of the reasons why many people are moving to freelancing. It can also be a great way to supplement income on top of other working roles or personal responsibilities. However, the administrative and fiscal burdens of freelance work, including accounting and ancillary costs like health insurance and social security contributions, can quickly become overwhelming and lead to disillusionment

As a result, the overwhelm eventually becomes too much for some and many ultimately switch back to full-time employment. But there are solutions for freelancers to enjoy the advantages of freelance status without the disadvantages. What are these solutions? Is it possible to fully enjoy all the advantages of being a freelancer without the disadvantages? The answer is yes. Here are the different options. 

The different classifications available to self-employed workers in the UK

Before delving into alternative options for independent consultants to avoid creating a company, it’s worth examining the various “conventional” classifications available for freelancers in the UK. No matter the classification you choose, you’ll need to register as self-employed, obtain a unique taxpayer reference (UTR) number and have to manage the day-to-day admin of running a business. 

Sole Trader

When starting out with freelancing, the general go-to status is Sole Trader.  It’s been available for many years and is the simplest status when it comes to administrative and accounting tasks. It enables you to obtain a unique taxpayer reference (UTR) number easily without the assistance of an accountant or legal advisor. As a sole trader, you have the freedom to decide on your rates and clients, giving you full control over your business. However, it also means that you are personally responsible for any financial or legal obligations that arise, without limit to the amount you may owe.

❌ Disadvantages of Sole Trader classification:

  • Unlimited liability puts personal assets at risk.
  • Limited access to capital may limit funding for growth.
  • Taking on multiple tasks may require expertise in multiple areas.
  • Limited growth potential due to reliance on the owner’s skills and capacity.

Limited company

A limited company is a separate legal entity from the business owners. Unlike a sole trader, a limited company can issue shares and have multiple owners, providing more flexibility in raising capital and sharing the workload. A limited company is also subject to corporation tax, which is typically lower than personal income tax rates.

❌ Disadvantages of Limited company classification : 

  • More complex administrative and accounting tasks.
  • Higher set-up and running costs.
  • Greater legal and regulatory requirements.

Looking for a better work/life balance as a freelancer? Check out our top tips here

How else can I become a freelancer without establishing a company?

So, whilst Sole Trader or Limited Company statuses can be great options for many, they do both come with their fair share of risks and administrative tasks. Freelancers often face complex, time-consuming administrative and accounting tasks under legal structures like limited companies. As a result, many are turning to simpler, more advantageous solutions that allow them to focus on their work while reducing the mental burden of paperwork and taxes.

Agency PAYE Worker

Some freelancers opt to work with agencies that operate on a PAYE (Pay As You Earn) system. In this scenario, you are employed directly by the agency and receive a regular salary. This offers job security, as well as access to employment benefits such as sick pay and holiday pay, and the agency is responsible for managing tax and National Insurance contributions, so you do not have to worry about administrative or accounting tasks. However, as an employee, you have less control over your work and may not have the same level of flexibility as a self-employed freelancer.

❌ Disadvantages of Agency PAYE worker status:

  • Limited control over work and clients.
  • Less flexibility compared to self-employment.
  • No ownership of the business.
  • Limited growth potential.

Working with an Umbrella Company 

Another option that often comes up when people look up “How to become a freelancer without creating a company” is working with an umbrella company. When working with an umbrella company, freelancers become an employee of the company, and the company handles all their administrative and tax obligations. This is a good option for those who don’t want to set up their own company or manage their own finances. Umbrella companies also offer employee benefits like sick pay, holiday pay, and access to a workplace pension scheme. However, umbrella companies charge a percentage of your income as a fee, and you have limited control over the clients and projects you work with.

❌ Disadvantages of working with an Umbrella Company:

  • Loss of control over financial affairs and billing.
  • Limited scope for tax planning and deductions.
  • Reduced take-home pay due to the administrative fees charged by the Umbrella Company.
  • Potential for disputes over employment status and rights.

Working with a Management Company  

An option that has arisen in the past few years is specialized Management Companies. These Management companies are generally specialised in one sector. For example, Hightekers specializes in tech and IT professions and allows IT consultants and engineers to optimize their activity whilst remaining completely independent. Freelancers who join Hightekers are also able to join one of the most powerful networks of IT and engineering consultants in Europe.

So, by partnering with a management company like Hightekers, not only do you avoid having to create a company or register for a specific classification, you also benefit from a range of advantages for freelancers, including the freedom to choose your own clients and projects, while benefiting from a monthly fixed payment and access to statutory benefits, offering more stability and security. Hightekers also provides limited liability protection, ensuring that your personal assets are safe. You won’t have to worry about IR35 either, and you’ll have access to permanent employee benefits such as sick pay and paid time off. Hightekers offers 360° admin management, allowing you to focus on your work and take-home pay maximization, thanks to our efficient payment and tax system. With a full-time work contract, you’ll have a steady stream of income.

Joining this sort of network of experts generates a real sense of belonging to a powerful and international community, but also allows you to discover and share mission opportunities internationally. This mutual aid helps you find the best possible missions for you through peer recommendation.

Curious to know what exactly is the role of a management company for an IT consultant? Find out here.

Unlock the full potential of your Tech/IT freelance career without the hassle of administrative and business management. Enjoy all the benefits of a permanent contract, without any of its drawbacks. Contact us today and make the most of your professional freedom.

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