Articles - 21st February 2019

Investing as a Freelancer: Everything You Need to Know

Words by Jenna Farmer
Illustration by Will Francis

Keeping track of your finances as a freelancer can be tricky. Not only can income be sporadic but it can mean we’re less likely to have a secure nest egg for the futurewith no generous workplace pension and our savings often being eaten up by a huge tax bill every January.

Yet the unpredictability of freelance life (hello, lack of sick pay!) makes it even more vital that you have a sound investment strategy. When done right, it can provide a much-needed income stream to complement your freelance work. We chat to finance experts to get the scoop on everything you need to get started…

What Sort of Income Should I Be Earning Before I Invest?

It’s a bit of a myth that investing is only for those in the highest tax bracket. In fact, almost anybody can (and should) start investing. “As a freelancer, making any investment provision is vital, whether it’s through a pension or an ISA. It doesn’t need to be significant amounts but even £25 per month can amount to £1,000’s with the benefit of compound interest” explains Catherine Morgan, Financial Coach and founder of The Money Panel.

The good news is that some investment platforms allow you to get started with simply your spare change. For example, the app Moneybox allows you to round-up your purchases to the nearest pound and then puts the extra into a stocks & shares ISA or a General Investment account on your behalf.

Of course, there are some exceptions. If you’re in debt, pour all of your energy into clearing that first as soon as you can (as remember, investments can go down as well as up).

“Don’t start investing until you’ve paid off short-term debt like credit cards and stashed away a rainy day fund-particularly vital for freelancers when we’re so exposed to the ebbs and flows of our clients’ cash flow” adds Davina Tomlinson, founder of

As a rule of thumb, three months savings in cash is a good cushion for this. Once these conditions have been met then I would start looking into investing straightaway!”

Where should I Invest My Money?

If you’re looking to invest, you have a few different options. For most, a stocks and shares ISA is the easiest place to start. Whilst riskier than a cash ISA (which is essentially a straightforward savings account), a stocks and shares ISA brings many benefits: you have an annual £20,000 limit (which can be divided between multiple types of ISAs); the income you make on it is tax-free and you won’t have to pay capital gains tax either.

However, if you’ve already tied up your annual limit in a cash or help-to-buy ISA, there are other options. Such as a General Investment Account which helps you build a portfolio. Unlike an ISA, you can invest an unlimited amount into these accounts, but you will pay tax on interest earned (although lower rate taxpayers can earn £1000 in interest before tax).

For complete beginners, apps such as Moneybox and Nutmeg offer both these types of accounts and can manage them easily on your behalf for a fixed fee. If you’re looking to invest serious sums of cash, working closely with an Independent Financial Advisor is vital.

How Much Money Should I Be Looking to Invest

This depends entirely on what you’re aiming to achieve. Rather than just saving a set amount, be flexible and adapt to your income and outgoings.“I don’t agree with investing a set percentage as a general rule of thumb as often this can put investors off” adds Catherine Morgan.

“Aim for something you can afford but that stretches you a little. Keep track of it and think of it as a bank account so you incentivise yourself to add more.”

When deciding how much money to part ways with, you’ll need to analyse your attitude to risk too, as the stock market can be volatile. Always make sure you have enough immediately accessible cash available if needed and it isn’t all locked away in long-term investment plans.

Should I Aim for A Certain Number of Shares?

There’s no one set answer here and it will largely depend on how much flexibility you’re looking for, the value of each share and the capital you have to get started with.

“Your investment decisions will vary depending on your short and long term goals and your investment horizon (i.e. how long you plan to invest for) and how much you have to begin with.” explains Davina Tomlinson.

The key is ‘balance’ rather than merely quantity. If you’re seeking long-term growth (rather than storing cash away for a rainy day), you’ll need to consider ‘locking’ your money away for longer periods of time to see a decent return.

A financial advisor (you can find an Independent Financial Advisor via sites such as Vouched For and Unbiased) will be able to help you develop a balanced portfolio; that won’t just be focused on one company or sector. This can help manage the risk of something going wrong and stops you putting all your eggs in one basket.

The key to investing as a freelancer is to do your research, figure out your own goals and what you’re comfortable with. There are some risks attached to investing for freelancers but plenty of rewards to reap too.

We champion the freelancers and every entrepreneur who took a leap of faith with their idea.

If this sounds like you, head over to our Virtual Office and send us your best work via an UnderPinned Portfolio. We want to hear from you!

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