Freelance vs. Self-Employed: What is the difference?

When you’re someone who enjoys working independently, you can also enjoy the benefit of freedom and flexibility. However, once you start to enjoy this, you might also start wanting to grow your business into something bigger. This is where the big difference between freelance and self employment arrives.

But do you understand the difference? In this article, we explain the similarities and differences, the pros and cons, and everything in between about being a freelancer vs. self-employed.

A freelancer is someone who starts to offer their services on a project or contract basis, rather than working as an employed person for a single employer. Often regarded as a sole trader, you would take on various projects to scale your freelance business across different clients.

Freelancers operate a business and need to handle their tax return and self-assessment for income tax, unlike employed workers who have taxes sorted for them by the employer.

Similarly to a freelancer, a self-employed person is someone who works for themselves rather than is employed by a company. While all freelancers are self-employed, not all self-employed are freelancers. A self-employed person might run a structured business with ongoing relationships or fixed contracts.

Freelancers and self-employed individuals enjoy remarkable independence and flexibility. If you’re a sole trader or someone who is running their own business, there might be a few challenges. But first, let’s explore the similarities between freelancers and self-employed people: 

Both freelancers themselves and self-employed individuals, such as sole traders, enjoy a high level of independence in managing their employment status. Whether you are a freelancer with multiple short-term projects or a business owner running a limited company with long-term contracts, you can set your hours with flexibility.

Unlike employed people or employed workers who work under a set structure, when you’re self-employed, this offers the freedom to choose projects that align with your skills and interests, which you may include on your freelancer CV. This also means that you can vary the amount of money you earn.

When it comes to tax responsibilities, both freelancers and self-employed people face similar obligations legally. In both situations, you would need to complete a tax return and pay your taxes while ensuring that they are accurate. This process is common for those running a business.

Although both groups benefit from the independence of self-employment, they also share the challenge of managing their taxes. This is a responsibility that sets them apart from an employed individual, whose income tax is deducted by their employer, and you don’t usually have to worry about this.

When comparing freelancers to other self-employed individuals, key differences emerge in how work is structured, the focus on growth, the amount of control, commitment levels, and your schedule. But, with this being said, there are some more differences for you to understand more about freelancers and self-employed people:

As a freelancer, you would typically operate independently while handling individual projects for and by yourself. While self-employed people would also work alone, as you grow the business, you’ll be employing more people, and you’ll have these people to share and focus more on scaling the business.

One of the main differentiators between freelance and self-employed people is the amount of growth. Freelancers typically maintain a flexible schedule with short-term projects, while self-employed people invest more in long-term growth. If you’re self-employed, you would invest more in expanding the business.

Both freelancers and other self-employed people enjoy independence compared to employed individuals, but the level of control can differ—and this is the debate you need to make before expanding your team.

As a freelancer, you will have more complete creative freedom over each project, while once you become a business owner, you might need to balance creative input with strategic decision-making and managing a team.

Whether it is on a per-day or per-project basis, freelancers typically engage in relatively low long-term commitment. This might be a few days or a month, and this could depend on the number of clients you retain. 

However, self-employed people commit to building a long-term brand or service while establishing more relationships and scaling a more consistent stream of revenue compared to employed people.

In both situations, as a freelancer or self-employed person, your schedule is in your control—as we’ve previously mentioned. 

However, freelancers may have more variability day to day, whilst business owners might have a structured schedule to manage operations and client engagements. Once you’re self-employed, your tax return and self-assessment might also become more complex, taking time away from your schedule.

Choosing to become a freelancer or embracing self-employment as a sole trader, sole proprietor, or even a business owner running a limited company offers a range of rewards. 

Unlike employed individuals or employed workers with fixed employment status, whether you’re a freelancer or self-employed enjoy advantages that can enhance your professional and personal lives. Here are three of those benefits for you to understand before you choose:

As a freelancer or self-employed person, you maintain full control over your work. With the autonomy, this lets you decide which projects to accept, set your policies, and manage all of your operations. This also lets you understand how much money you can earn each month and the different types of projects that you win—this is in your control.

This level of control also extends to handling your tax return and self-assessment for income tax, a responsibility that contrasts with the experience of employed people who have these details managed by their employers. 

As we alluded to in the previous benefit, earning money is also in your control. As you take on more projects, you’ll be able to earn more money. This is why they come as you become self-employed. Once you start scaling your business and employing more people, this enables your business to take on more projects and grow even further. 

With the freedom to take on multiple projects, you have the opportunity to maximise your earnings without being restricted by a fixed salary or limited by the constraints that employed individuals might face.

Whether you’re talking about working or in your personal life, being able to have your schedule is a dream for anyone. Letting yourself work at a time when you’re the most productive isn’t easy for those who are employed.

If you’re self-employed, you might also have some of these benefits but it is still a benefit since you’re in control. As a freelancer, you’re able to work whenever and wherever you would like to. This enables you to maintain a better work-life balance.

To summarise the path between freelance and self-employed, below is a table that shows the differences and similarities between the two. This is based on work and income structure, flexibility, and client relationships.