Freelance Development: Understanding the Financial Side

guest-posterAs a talented programmer/developer the prospect of going freelance should be enticing. You will, in fact, be working for yourself and able to choose the jobs that appeal to you and help make your name within the profession.

A top programmer/developer working as an employee can currently earn around $67,000 per annum and with bonuses and profit-sharing double that figure. As a freelancer, you have the opportunity to exceed those figures. Current, hourly rates for those with around five years’ experience can top $150 an hour, though the actual figure will depend on the actual project being undertaken.

Despite the prospect of higher financial rewards, the decision to become involved in freelance development should not be taken lightly. Such things as a regular pay check, health insurance provided by an employer, and even paid vacations become outdated. Being successful will demand total dedication, long working hours as well as an understanding of the financial side of freelancing.

Becoming freelance does present problems that must be overcome, if you are to be a success. There is the additional cost of finding working premises, purchasing the tools of your trade, and crucially important, marketing your services in a bid to find work. Marketing can be expensive but is essential if you are to secure the projects to enable your enterprise to be a success.

A daunting prospect facing freelance programmer/developers is keeping accounts and meeting tax obligations. As a freelancer, you will not have your income tax deducted at source. You will be responsible for meeting your own tax obligations, which means informing the tax authorities of earnings and completing the necessary forms.

You should also keep records of all your business expenses, including the cost of running your premises, purchasing equipment, and marketing as these are deductible against tax.

There are also other savings that can be made against your tax liability. These include deductions against the cost of travel, meals, and entertaining clients. If your office is based at home, you can claim a portion of rent, mortgage, and even business-related internet expenses against your tax. It cannot be emphasized enough; this means keeping accurate records, which is especially important should the tax authorities decide to carry out an audit.

Without a regular pay check, you will have to become adept at billing and invoicing to secure the money you have worked hard to earn. Various systems online can be used to help you with this task. However, there is an easy way to handle contractor pay through an umbrella company.

By using the service of an umbrella company, you will save yourself much of the hassle associated with being a freelancer.

An umbrella company will relieve you of the problems of dealing with your own accounts and tax payments. It will also ensure you benefit from your maximum expense and tax allowances. Most importantly, such an arrangement will allow you to concentrate on what you do best – your work as a programmer/developer – while still enjoying all the financial benefits to be derived from operating as a freelancer.