New year, new start … Is 2025 the right time to become your own boss?

Has the new year spawned thoughts of a new career? Or have you long been considering striking out on your own and being your own boss?

Whether you are considering going freelance because of a desire to shake off the shackles of a nine-to-five job, or as a temporary move as a result of a sudden redundancy, it’s a growing club to join.

There were 2 million freelancers in the UK in 2023, according to an analysis of official figures by the Association of Independent Professionals and the Self-Employed (IPSE), a not-for-profit lobby group – that’s up 11% on 2022.

It’s not an easy life: research by IPSE found that in the third quarter of last year, freelancers’ confidence in their own businesses had fallen to its lowest level in over a year, while six in 10 were expecting their costs to increase over the next 12 months.

But it can be rewarding. Better pay for each day you work (although recent figures from IPSE indicate that the average freelance day rates fell by 16% in the last quarter); setting your own hours; no micromanaging boss, or office politics to contend with – they all sound appealing.

If 2025 is to be the time you go it alone, there are some things you should do to prepare yourself for the shift in your work status.

Prepare for highs and lows

While freelancing certainly does have its appeal, the reality for you might be very different.

Freelancing involves chasing invoices, joining (and contending with) various companies’ payment systems, not knowing when the next pay cheque might come in, and certainly no employer contributing to your pension or covering sick pay. Consider whether you have a personality that can deal with the highs and the lows, including the lack of routine.

Speak to other freelancers in your industry to find out how they are faring – or surviving.

And browse posts from your peers on LinkedIn so you have a better understanding of the kind of difficulties those in your sector are facing now.

Create a financial buffer

Ideally, you want to make sure you have some savings to dip into in case of an emergency, or if it takes a while for your first client – and therefore payment – to come through.

“It’s sensible to have three months of savings to tide you over,” says Andrew Chamberlain, director of policy at IPSE.

Make sure you are also setting aside funds every month from your earnings to cover your tax bill and national insurance contributions.

“Around 30% is a handy rule of thumb,” says Sophie Cross, the founder of Freelancer Magazine. “Also, put some extra aside each month in case of a quiet period.”

It is important to be aware of the not-so-loved “payments on account” – advance payments towards your next tax bill based on the previous year.

If you are unsure of how much tax you might need to pay, HM Revenue and Customs has calculators on its site to help work out how much to put by.

If you are not one for numbers, it might be worth finding an accountant (word of mouth is great here) to help you understand what expenses you can account for, and assist you with filing your tax return.

However, many people don’t need an accountant, and you can easily do it yourself (and save money).

Cross also suggests setting up a business bank account to keep your work and personal finances separate from day one.

“I recommend using accounting software like FreeAgent, which will automate some of your accounting tasks and help track your earnings and costs,” she says.

“You can also give your accountant direct access.”

Choose your status

In a nutshell, a sole trader is an individual trading on their own, whereas a limited company is a separate legal entity with the earnings belonging to the company rather than the owner.

If you are unsure which will be most appropriate, speak to an accountant.

There are pros and cons to both, says Chamberlain. “It used to be the case that once you earned £40,000, it would be more tax-efficient to set up a limited company,” he says.

“But the tax rules and thresholds have changed, so it’s now not too much of a tax advantage compared to being a sole trader.”

However, there are some reasons to choose to operate as a limited company.

“Some clients prefer to work with them as they offer them a certain level of protection,” says Chamberlain.

“It can also offer you protection if your company was to be sued. It means your personal assets, such as your house, are protected.”

Being a limited company means you are able to make pension contributions through the company in a more tax-efficient way than if you were a sole trader.

Do some planning

“Always look at your freelancing as a business,” says Cross. “It will help you create separation between your work and personal life, and put you in a better money mindset.”

She advises you set clear goals to aim for. “You’re much more likely to reach them than if you metaphorically drift down the freelance river, just seeing what happens.”

As you might do with an employer, think about setting six-monthly reviews. You could create a level of accountability by doing this with a fellow freelancer.

If possible, start building up work before you take the leap to going full-time freelance. Many freelance careers are born out of side hustles: it is a good way to build up potential income rather than suddenly going freelance.

When it comes to future clients, contact recruitment firms in your sector to see what freelance or contract work they have, and join marketplaces such as Freelancer.com and Upwork.

Be social

Don’t be afraid of dropping your contacts a line to let them know you are now freelance (or about to be) and don’t shy away from shouting about your new work status on social media.

“LinkedIn is where it’s at these days in terms of growing your online network of peers and prospects,” says Cross.

“Spend a little time there every day, commenting on others’ posts and starting conversations with your own.”

If you are used to working in a team, transitioning to freelancing at home on your own might take some time to get used to. You may wish to join a professional industry body so that you can keep up to date with networking events.

Alternatively, you could join a co-working space so that you have people around you – this is also a great way to network and can offer up new opportunities – or work from a cafe.

You can meet people online, too. For example, Freelancer Magazine hosts virtual co-working sessions every Tuesday, Wednesday and Thursday from 9.30am to 11.30am.

Protect yourself

While professional indemnity insurance isn’t a legal requirement, for many self-employed people it could be sensible to organise cover.

“If you’re working on a client’s system and something goes wrong, they might decide to hold you liable, and the cost of that mistake might be a million quid,” warns Chamberlain.

The same, he says, applies to contracts. “We always advise freelancers to have a written contract, which should set out the terms and conditions of the agreement.”

You can always find contract templates online to use – remember to include the scope of the work, deadlines and the rate of pay.

And last, but not least, work out what rates you will charge.

It’s often hard to know exactly how much, but you can ask other freelancers for their advice and check out day-rate calculators online.

Taking the leap: ‘I never learned any of this in school’

When Jeb Jagne finished university, he went straight into a graduate job in marketing before moving into PR. It paid well, was secure and was what he thought you were meant to do.

“I’d fallen into this career and hadn’t really stopped to think: is this what I want? Do I want to work nine to five?” he says.

At about the same time Jagne, now 25, enrolled on a short flower-arranging course. “There was something in moving my hands and just having a hobby again that I loved,” he says.

“For the next few months I would wake up at the crack of dawn on a Saturday, go to the market, and get flowers to have at home, or for my mum.”

Family and friends started commissioning arrangements. So his days would often start at 5am at flower markets, then he would go home to arrange and photograph the flowers before getting ready for the office. “I was almost like living a double life,” he says. This continued for two years until, last July, he handed in his notice.

The next few months were “a little chaotic”, as he formed a business plan and got Nyang Flowers off the ground, registering as a limited company.

Jagne, who lives in Watford, says dealing with HMRC “still frightens me”, but he got advice from friends who were freelance.

“I never learned any of this in school. Like what being a sole trader is, and having a limited company … online it’s full of jargon. It can be quite hard to navigate,” he says.

“It’s only through actually calling Companies House and HMRC and saying: ‘Can you explain this to me simply?’ and speaking to a real person. They’ve been great, and really helpful in going through the process.”

Jagne set up in his living room. “I can work on a project basis, and that helps with overheads – the flowers, getting them to a location, and then vases, or things like that.”

Since starting up, he has worked with clients including Selfridges and Adidas. For a typical job, he spends a day and a half preparing – designing arrangements, going to flower markets, sourcing vases – and a day on site for the client.

Despite working fewer hours, he now makes more money than in his old job. “To put it into perspective, one job can usually be like my month’s salary in PR.” Mabel Banfield-Nwachi