As we often call self-employed and freelance workers different things, what’s the actual difference between the two? It can be confusing getting to grips with the different terminology and legal differences, but they’re more similar than you think. Below, we’ll go through whether or not freelancers and the self-employed are different, or the same.
Table of Contents
- Is freelance and self-employed the same thing?
- Difference between freelance and self-employed
- Do freelancers have to register as self-employed
- How to register as self-employed freelance
- Self-employed vs freelance taxes
- Issues affecting freelance and self-employed workers
- Self-employed and freelance difference
Is freelance and self-employed the same thing
Legally, freelancers and self-employed are the same thing, but there are a few differences. Firstly, all freelancers are self-employed, but not every self-employed person is a freelancer. Freelancers typically work on multiple short-term projects for different businesses, whereas self-employed are more likely to be entrepreneurs, business owners or start-up founders.
When it comes to paperwork and your legal status, however, both are the same.
Difference between freelance and self-employed
The main difference between freelancers and self-employed is how you work. Legally, they’re the same thing, but freelancers will tend to do multiple short-term jobs for lots of different businesses, while self-employed people are probably running their own business and have more autonomy.
Freelancers almost always work alone. For example, they work on a particular project for a client, usually for an hourly or set fee. However, what you usually think of as self-employed are people who work for themselves in a registered business, who can also bring in employees or even freelancers to undertake work for them.
Do freelancers have to register as self-employed
Yes, freelancers must register as self-employed—. Legally, freelancers are classed as self-employed, so you will still need to register with HMRC so that you can pay tax and national insurance—so long as you earn more than £1000 freelancing. This is commonly called a ‘sole trader’.
You will need to register by October after the end of the tax year that you begin taking income. For example, if you began freelancing in May 2021, then you would need to be registered with HMRC by October 2022. Remember that the tax year runs from 6th April to 5th April.
How to register as self-employed freelance
If you're a freelancer and earn more than £1,000 in a single tax year, you need to register as self employed—also known as a ‘sole trader’. Double-check with HMRC’s Employment Status Checker to confirm your employment status.
After registering as a sole trader or self-employed, you will need to submit a Self Assessment to pay your tax and national insurance.
Self-employed vs freelance taxes
As self-employed and freelancers are legally the same thing, taxes and national insurance are worked out in the same way. To begin paying income tax and national insurance, you need to register with HMRC, which is often called a ‘sole trader’. But you may also consider setting up a private limited company.
To pay your tax and National Insurance, you need to submit a Self Assessment form. Make sure you’ve kept a note of your income and business expenses. But don’t worry if you’re confused about what exactly you need to do—there’s plenty of information out there on paying tax and National Insurance as a freelancer.
Issues affecting self-employed and freelance workers
There are lots of advantages to being self-employed and freelance, as well as plenty of issues, namely insecurity. Unlike being employed, work isn’t guaranteed. You will have to find work and clients yourself, which can be stressful at the best of times. This means your income could fluctuate every month, making it difficult to plan ahead or feel too secure.
It’s also worth considering the price of becoming self-employed and starting your own business. There can be high start-up costs depending on the type of business you’re setting up. Read our guide on the average cost of starting a new business in the UK for more information.
Even freelancers will have to deal with set up costs, like specialist equipment, software or more. With the switch from employment being a big investment, the right business insurance and freelance insurance can help protect you from financial insecurity.
Self-employed and freelance difference
Self-employed and freelance, despite the different names, and very similar. There is no real difference between the two as legally they are the same. The only differences are what you’re likely doing for work.
For instance, freelancers will typically work on short-term projects for lots of different clients. But self-employed people would more often be their own boss, working for themselves on their own projects.
Overall, there’s a lot of confusion around self-employed and freelancers. Although many people think they’re different, it’s just a matter of terminology as legally they’re the same thing.
An important part of the self-employed and freelance journey is registering with HMRC and then filing for tax and national insurance Self Assessment.
As they’re the same thing, you will face similar challenges, like insecurity without having a permanent, secured income like you would if you were employed, or even potential start-up costs.