Why become a freelance translator?
Deciding whether to be a freelance translator is a big consideration. Whilst the freedom may be tempting, it’s important to know what you’re getting yourself into before you take the plunge.
Going freelance is a big decision and one that changes a lot of your day-to-day life – and that’s not to mention how you record your income, expenses and pay tax.
Keep reading for our rundown of what to expect from life as a freelance translator.
Free is for freelance living
A major advantage of being a freelance translator instead of working for an agency is that you can work when you want, where you want and how you want. You’re in control of your timetable and your clients. This is great in that if you find a piece of work boring, you don’t have to take it on.
This can be very liberating, but it also means that you’re in charge of ensuring that you’re getting enough income each month to live comfortably.
Here are a few things to think about:
- Do you have enough clients to sustain your income?
- How will you market your services?
- Where will you record your income and expenses?
- What is your rate?
- Can you work from home or will you need to rent office space?
- Are you disciplined enough to be a freelance translator?
How is tax different for a freelance translator?
If you work for an agency, your taxes are managed by your employer. You pay tax via what’s known as PAYE (Pay As You Earn). Every time you get your monthly salary, your taxes are automatically deducted.
However, when you’re freelance, you’re responsible for paying your own taxes.
There are two taxes that self-employed workers have to pay:
- Income Tax – this is calculated based on what you earn
- National Insurance – this qualifies you for certain stat-provided benefits e.g. the state pension
You will pay both of these as part of your tax return.
Read more about how your tax return works here.
How much Income Tax should I pay?
This varies from year to year. The UK government often announces updates to Income Tax rates in the Autumn Budget each year. In the 2020/21 tax year, take a look at the rates:
|Up to £12,500||0%||Personal allowance|
|£12,501 to £50,000||20%||Basic rate|
|£50,000 to £150,000||40%||Higher rate|
|over £150,000||45%||Additional rate|
How much National Insurance do I pay?
Unlike Income Tax, you pay National Insurance whether you earn more than the tax-free Personal Allowance or not.
- A flat rate of £3.05 per week when you earn £6,475 or more – this is also known as Class 2 National Insurance
- 9% of your self-employment profits when you earn more than £9,501 per year – this is known as Class 4 National Insurance
How do expenses work for a freelance translator?
If you’re self-employed, you’re allowed to claim back your business expenses to reduce your tax bill when you do your tax return.
Your tax bill is based on the tax year – between 6th April to 5th April of any period.
Here are some examples of what you can expense, although HMRC will allow any genuine business spend to be deducted from your earnings so make sure that you keep a record of everything earned and spent!
- Marketing costs
- Travel (for business)
- Training courses
- Accounting costs
- Office space
- Laptop, work phone etc.
Sole trader vs. limited company?
You may or may not know that there are two ways of being self-employed:
- Sole trader
- Limited company
A sole trader is a one-person company. You don’t have staff, and you’re in charge of all your business affairs. But a limited company is different. If you wanted to set up your own translation agency, you would register as a limited company. For translation, one of the advantages of this is that you could hire people who fill in the linguistic gaps that you are missing.
If you can speak French, English, Italian, Spanish and German, for example, but you get a pitch for a Japanese to English translation, you’d have to turn it down as a sole trader.
As a limited company, you could enlist one of your employees to take on the project.
That said, the tax implications are different for limited companies.
Tax as a limited company
- You’ll have to register your company with Companies House
- You may owe Corporation Tax
- You pay National Insurance as both an employer and employee
- You’ll not get the tax-free Personal Allowance
- As a limited company, you have to register your director’s (presumably you) details with Companies House – and they’ll be publicly available
But whichever you choose, it’s very easy to switch between being a sole trader and a limited company, so you don’t have to worry if you change your mind.
If you’re still not sure, take a look at our comparison between the two.