Around 8.6m people are currently freelance, equivalent to 16% of the workforce. This includes those who are either full time self-employed or carry out contract work in addition to their main job.

The research, collated by Direct Line for Business, found the average freelancer saves up £16,000 before going freelance, equivalent to 70% of the average UK salary. Overall, 71% of self-employed workers saved up money before going freelance to allow for shortfalls in monthly income, to buy essential business goods or to give them a cushion for holidays and sick leave.

For most people who go freelance, this was enough to meet their needs. Only around a third (31%) said they needed more.

Preparation

Aspirant freelancers also need to consider that they they will be taking sole responsibility for tax and legal issues. On average, self-employed workers spend seven months and three weeks preparing to go freelance. That may be reading up on tax implications (27%) or identifying target markets and audiences (25%).

A few freelancers are more gung-ho. Nearly one in three (30%) spend less than a month getting ready to go it alone and 29% have no savings before they start.

Dealing with tax issues is one of the biggest concerns for freelancers before setting up shop, with a third (33%) seeing this as a major hurdle for going it alone. Other issues include not getting paid when on holiday and being able to meet existing financial commitments (both 26%).

Pension worries

Only one in five worries about their pension, in spite of research showing that the self-employed have poor provision for retirement. They don’t benefit from auto-enrolment or company contributions.

Jazz Gakhal, managing director at Direct Line for Business said: “Going freelance is an exciting prospect, with the idea of becoming your own boss extremely tempting. There are pros and cons, of course, as independent contractors can often earn more by charging day rates, but don’t benefit from paid holiday, pensions and sick leave. Any budding entrepreneur should consider the value of these additional benefits as well as any change in salary before making the leap.”