How to become a freelancer without creating a company

In the UK, the number of independent freelance consultants is rapidly increasing each year. According to Statista, there are currently around 4.25 million self-employed people in the UK.

 Of these, around 2.8 million operate as sole traders and 1.9 million as freelancers.

 Joining the movement as an IT Freelancer means you can also enjoy the benefits of managing your own career, choosing your clients and working hours, and having a better work-life balance.

The downside is that 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, many freelancers end up switching back to full-time employment.

But there are solutions for self-employed professionals to enjoy the perks of freelance life without the drawbacks.

In this article we will explore some of these solutions and show you how you can thrive in your freelance IT career without having to create a company…and some of the headaches that go with it.

Before delving into the solutions for IT contractors or freelance IT pros to avoid creating a company, it’s worth examining the common classifications available for all freelancers in the UK.

 Whichever of these classifications you choose, you’ll need to register as self-employed, obtain a unique taxpayer reference (UTR) number and manage the day-to-day admin of running a business. 

Sole Trader

When starting out as a freelancer, the go-to status is usually sole trader. 

It’s one of the simplest status options and enables you to obtain a unique taxpayer reference (UTR) easily without the assistance of an accountant or legal advisor.

As a freelance IT sole trader, you have the freedom to decide your rates and find your clients, giving you full control over your business. However, it also means you are personally responsible for any financial or legal obligations that arise, without limit to the amount you may owe.

❌ Drawbacks 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.

❌ Drawbacks of Limited company classification: 

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

So, how  can I become an IT freelancer without establishing a company?

While Sole Trader or Limited Company statuses are great options for many, they both come with their fair share of risks and administrative demands.

IT contractors and self-employed professionals often face multiple, time-consuming admin and accounting tasks under legal structures like limited companies. As a result, many are looking for simpler solutions that allow them to focus on projects and business growth and reduce the stresses of paperwork and taxes.

Agency PAYE Worker

Some IT contractors and 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. What’s more, the agency is responsible for managing tax and National Insurance contributions, taking it off your plate.

However, as an employee, you have less control over your work and may not have the same level of flexibility as a self-employed IT 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 are searching for solutions to become a freelancer without creating a company is working with an umbrella company.

When you work with an umbrella company as an IT freelancer, you become an employee of the company, and they take care of your 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, they charge a percentage of your income as a fee, and you have limited control over the clients and projects you take on.

❌ Drawbacks 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

A solution that has come to the forefront in the past few years is the option of working with a specialised management company.

Management companies generally specialise in a specific sector. For example, Hightekers specialises in tech and IT professions and allows IT consultants and engineers to optimise their earnings and activity whilst remaining completely independent. 

IT freelancers who join Hightekers are also able to join one of the most powerful networks of IT and engineering consultants in Europe.

By partnering with a management company like Hightekers, not only can you avoid creating a company or registering for a specific classification, you also benefit from a range of advantages for freelance IT pros. 

These include:

• The freedom to choose your own clients and projects while benefiting from a monthly fixed payment.
• Access to statutory benefits, giving you more stability and security.
• Limited liability protection, ensuring 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 maximise your earnings, thanks to our efficient payment and tax system. With a full-time work contract, you’ll have a steady stream of income.

Joining our network of IT and tech experts means you belong to a powerful, international community which allows you to discover and share client and project opportunities internationally. 

At Hightekers, we strive to help you unlock the full potential of your freelance IT career without the hassle of admin and business management.

Enjoy all the benefits of a permanent contract, without any of its drawbacks.

Contact us today and let’s enhance your your professional freedom