In this report, I will be appraising and critically analysing the nature of working as a freelancer and being self employed within the creative industry. The term Creative Industries covers all jobs related to creative practices such as music, theatre, and the arts. In the image below there are several examples:
In the UK, the creative industries contributed over £111 billion to the economy. That works out at around £306 million a day – nearly £13 million every single hour. (Gov.uk – Department of Digital, Culture, Media & Sport, 2020)
It is estimated that there are around 2,040,000 people working within the creative industry in the UK according to official data, with 75% of these jobs being outside of London. (Employment Figures – Creative Industries Council, 2021) Out of this number, around 47% of creative workers are self-employed. (Easton and Cauldwell-French, 2017) This is almost an even split between employed and self employed workers meaning there are around 1,081,200 self employed workers in this sector.
Self Employed workers vs Freelance workers:
The term self employed generally refers to someone who offers a set service as their main or only trade, therefore usually being very proficient in their specific field. For example my plan for my private tuition services would place me under the banner of being self employed, as this would be my sole job and focus.
While also working for themselves, freelance workers are typically the people who fill out a variety of roles where they can, often working on several projects at once. “Freelancers may carry out multiple jobs on behalf of different companies, and often tend to work alone.” (Express, 2020.) An example of a freelance musician would be having someone play as a session musician one day, and then as a solo artist another day. Freelance workers have a large amount of flexibility to fill all kinds of roles and are an essential part of a workforce when called upon as they tend to gain large amounts of experience in several fields.
Around 15% of the workforce in the UK is currently self employed, that’s about 5,000,000 people total.
What are the differences between Employment and Self-Employment?
Self Employment:
- Self employed workers essentially work for themselves, and have full control over their work. “The state of working for oneself as a freelance or the owner of a business rather than for an employer” (Oxford Languages, n.d.)
- Self employed workers are not entitled to many of the benefits employed workers receive, such as sick pay, maternity leave, and paid holiday time.
- Generally most freelancers and self employed workers will earn more money per hour than an employee, however do not have as stable of an income overall.
- Self employed workers have to file a tax return every year stating what they have earned.
Employment:
- Employed workers generally work to a contract of set hours with a fixed hourly rate, meaning they have much more dependable income than freelancers.
- Employees are entitled to a range of benefits such as sick pay, paid holidays, maternity leave, breaks during the day, and to earn at least the minimum wage. More of these are covered in the Employment Rights Act 1996. (https://www.legislation.gov.uk/ukpga/1996/18/contents)
- Employers are required to have insurance covering illness or accidental injury of their employees.
- People in employment do not have to file a tax return as tax is automatically paid as they get paid.
Due to the nature of self employment many people within the creative industries work as an employee as well as freelance in order to increase their overall income and maintain some reliability. For many musicians in particular, being in employment helps to fund their music career and can provide the funding for things such as recording music professionally or the promotion of said music.
Tax:
Self employed workers are required to fill in a self assessment every year for the amount of tax they are due to pay based off of their overall profits that year.
Above you can see the list from the UK government site showing income tax rates for the UK based on yearly income. Before you have to pay any tax at all, you are entitled to an allowance of up to £12,500. Only after earning past this threshold will you have to start paying income tax. As shown in the list above, the amount of income tax a person has to pay increases as their earning increases, capping at 45% for anyone making more than £150,000 per year.
While you may not have to pay tax until you earn over the £12,500 threshold, you must still declare your yearly income if it exceeds £1000.
How to set up as a self employed worker and the difference between a sole trader and limited company:
If you begin working for yourself, either freelance or self employed, you are automatically classed as a sole trader by the HMRC, and therefore may have to register as a sole trader, or as a limited company through the government website. (Gov.uk.)
Sole Trader:
Sole traders make up 59% of all private businesses in the UK, making them the most common type of self employed business.
Setting up as a sole trader is much more straight forward than as a limited company, and involve much less paperwork. You also retain more privacy than a business.
The biggest drawback to being a sole trader is that you have unlimited liability therefore should your business go into debt then you remain liable for it and thus run the risk of losing personal assets should this occur.
Obtaining business loans or other financial help from banks can prove difficult as the banks tend to prefer offering these services to companies.
Limited Company:
The most notable benefit of registering as a limited company is that you will have limited liability, as this creates a legal difference between a business and it’s owner. This in turn means that any personal assets aren’t at risk should the business fail.
Limited companies also take advantage of having to pay corporation tax rather than income tax. This is a rate of 19% from the 1st of April 2021 and then 25% from the 1st April 2023. (Gov.uk.) This means much less tax paid overall when a limited company earns anything past £50,000 per year, as the income tax rate jumps up to 40% when exceeding this figure. Additionally, limited companies have access to a wider selection of tax deductible expenses and allowances.
A drawback to setting up as a limited company is a larger amount of responsibility, such as the Director’s Fiduciary Responsibilities, and the filing of annual accounts and returns. These responsibilities can be time consuming and also prove to be costly.
(Simply Business, 2020)
The impact of Covid 19 on the self employed:
The Covid 19 pandemic was an unprecedented factor that has now changed work life for many over the whole year that it has now been present for. When the pandemic first began to arise around the end of February 2020, many were taken by surprise by it’s severity and infection rate. This lead to the UK having to lockdown the month after, resulting in thousands of people no longer able to work.
During these lockdown phases, employed workers had the benefit of the furlough schemes and sick pay, meaning they were still earning around 80% of their normal income while being unable to go to work.
The self employed workforce don’t have access to these benefits, and many began loosing some, if not all of their income because of it. “The ERC report concluded that 22% of the self-employed, or 1.1 million, are in sectors most at risk of loss of livelihood in the current crisis.” (J. Smith, 2021)
The UK government eventually began to provide grants to the self employed who needed the financial support. This was for up to 80% of your average monthly profits from the previous three years, capping at a maximum £2,500 per month. (ITV News, 2020)
The music industry was impacted massively by the pandemic as mass gatherings both in, and outdoors was swiftly banned in an attempt to lower infection rates. This meant that shows and festivals were postponed or cancelled altogether, and many venues started to loose business. Furthermore, all pubs and music venues were legally ordered to close to stop the gathering of large groups and this stopped many small local musicians from performing at all. Music venues began to have to close down due to the lack of immediate financial support from the UK government, and as of January 2021 over 400 small music venues in the UK are at a high risk of being closed permanently according to the Music Venues Trust. (BBC, 2021)
The impact of Brexit on the Creative Industries:
In addition to the coronavirus lockdown measures, the creative industry has also been affected by Brexit.
“MPs at the digital, culture, media and sport committee hearing told DCMS minister Caroline Dinenage that her department was treated as an “afterthought” by the government, and that during Brexit negotiations the creative industries were not prioritised, despite their accounting for about a quarter of the UK’s economy.” (Bakare, 2021)
Travel in Europe is the biggest issue now, as pre-Brexit it was as simple as taking a valid passport as things like healthcare was already covered. Due to the UK disbanding from Europe we are now required to provide much more documentation – some of which is costly.
Musicians and performers now may need to provide business travel, PLI, and health insurance, and also likely will require a work permit depending on the country. All of these are extra expenses can mount up to a large sum, potentially denying many smaller groups and self employed workers access to the EU. This is particularly bad for the UK music industry as small bands are now being denied the ability to book tours internationally, in turn damaging their growth as artists. This flowchart provided by the Musicians Union helps to break down the legal requirements of post Brexit travel to the EU:
Primary reseach:
When researching the impact of Covid 19 and Brexit on the self employed, I made a short survey with a few questions regarding these topics, so that I could get an insight into how many working people feel about those circumstances.
Here are the results of my research:
While my sample size for these answers is quite small, I did try to get honest results from a variety of age groups. I feel that this is an adequate representation of how many people feel regarding the circumstances when I compare these results to how many have previously spoken in a similar manner during these events.
Everyone who answered either were, or knew of somebody who is self employed, and another (38%) of participants would consider going into self employed work.
When asked about the effectiveness of government aid to self employed workers, all participants agreed that there was not enough done to help.
Upon asking about weather the new travel restrictions that have been put in place as a result of Brexit, And overwhelming majority of answers concluded that these changes are unnecessary.
In regards to the creative sectors being labelled as something of an afterthought by the UK government, Most answers tended to lean towards strongly agreeing with the statement.
Finally, 100% of participants consider the creative sectors a vital part of the UK’s economy.
From this poll I can conclude that both Brexit and the Covid pandemic have generally had a negative impact on the self employed workforce, and the creative sectors. I would like to re-do this poll in future with a larger sample size to see how these circumstances have affected people in all corners of the UK.
This concludes my report on the nature of freelance and self-employment in the creative industries.
Bibliography:
Whitechapel Gallery. 2019. Discover Creative Careers. [online] Available at: <https://www.whitechapelgallery.org/events/discover-creative-careers-1/>
Adams, N., 2020. UK’s Creative Industries contributes almost £13 million to the UK economy every hour. [online] GOV.UK. Available at: <https://www.gov.uk/government/news/uks-creative-industries-contributes-almost-13-million-to-the-uk-economy-every-hour#:~:text=Arts%20and%20culture-,UK’s%20Creative%20Industries%20contributes%20almost%20%C2%A313,the%20UK%20economy%20every%20hour&text=New%20government%20figures%20show%20the,%C2%A3306%20million%20every%20day.>
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GOV.UK. 2021. Corporation Tax charge and rates from 1 April 2022 and Small Profits Rate and Marginal Relief from 1 April 2023. [online] Available at: <https://www.gov.uk/government/publications/corporation-tax-charge-and-rates-from-1-april-2022-and-small-profits-rate-and-marginal-relief-from-1-april-2023>
Music Venues Trust. 2021. Home. [online] Available at: <https://saveourvenues.co.uk/#/>
BBC News. 2021. Covid and music: A year without gigs for independent venues. [online] Available at: <https://www.bbc.co.uk/news/newsbeat-55795914> [Accessed 23 March 2021].
Smith, J., 2021. Self-employment and COVID-19. [online] Prospects.ac.uk. Available at: <https://www.prospects.ac.uk/jobs-and-work-experience/self-employment/self-employment-and-covid-19> [Accessed 23 March 2021].
Musiciansunion.org.uk. 2021. Flowchart Guide for Musicians to Working in Europe. [online] Available at: <https://musiciansunion.org.uk/legal-money/rights-and-legislation/brexit-guidance-for-musicians/flowchart-guide-to-working-in-europe>