Can I Freelance Whilst On Furlough? Exploring the Rules and Regulations

If you’re currently on furlough and thinking about freelancing, you might be wondering if it’s allowed. The good news is that it is possible to freelance whilst on furlough. However, there are certain things you need to be aware of before you start taking on freelance work.

Firstly, it is important to check your existing contract to ensure that it allows you to freelance whilst on furlough. Some employers include no-compete clauses in employment contracts, which could prevent you from doing similar work for others. Additionally, you will need to ensure that the freelance work you take on does not interfere with your furloughed status or your ability to return to work when required.

In this article, we’ll explore the rules around freelancing whilst on furlough, what you need to consider before taking on freelance work, and how to ensure that you’re not breaching any rules or regulations. We’ll also provide some helpful tips for those who are considering freelancing whilst on furlough. So, if you’re thinking about freelancing whilst on furlough, keep reading to find out everything you need to know.

Understanding Furlough

Definition of Furlough

Furlough is a temporary leave of absence from work. It is usually granted to employees when there is a lack of work or funds to pay them. During furlough, employees are not required to work, but they remain employed and are entitled to certain benefits, such as holiday pay.

The Coronavirus Job Retention Scheme

The Coronavirus Job Retention Scheme, also known as the Furlough Scheme, is a government initiative introduced in response to the COVID-19 pandemic. The scheme is designed to help employers who cannot maintain their workforce due to the pandemic. It allows employers to furlough employees and claim back a portion of their wages from the government.

Furlough Eligibility Criteria

To be eligible for the Furlough Scheme, you must have been on your employer’s payroll on or before 30th October 2020. You must also have been included in a PAYE (Pay As You Earn) submission to HMRC (Her Majesty’s Revenue and Customs) on or before that date. Furthermore, you must have been instructed by your employer to stop working temporarily due to the pandemic.

Legal Aspects of Furlough

Employment law governs furlough, and employers must follow certain rules when implementing furlough. For example, employers must consult with employees before furloughing them and must provide them with written notice of the furlough. Employers must also pay furloughed employees at least 80% of their usual wage, up to a maximum of £2,500 per month. Employers must also continue to pay National Insurance and pension contributions for furloughed employees.

Freelancing Fundamentals

Transitioning to freelancing introduces you to self-employment, where you undertake project-based work for clients. This could span writing, design, consulting, among other fields. Freelancers cherish the liberty to select clients, manage projects, and set their work schedules. However, they shoulder the responsibility for their taxes and lack conventional employment benefits like healthcare and paid leave. Understanding tax obligations is paramount, and resources on what tax you should pay as a freelancer offer essential guidance.

Defining Freelance Work

Freelance work is a type of self-employment where you work on a project basis for clients. Freelancers are not employees of the companies they work for and are not entitled to employee benefits. Freelancers have the flexibility to work on multiple projects for different clients and set their own rates and schedules.

Freelance vs Employment

As a freelancer, you are self-employed and responsible for your own taxes. You are not an employee of the companies you work for and do not receive benefits such as healthcare, paid time off, or retirement plans. On the other hand, as an employee, you receive these benefits and your taxes are automatically deducted from your paycheck.

Self-Employment Tax Responsibilities

As a freelancer, you are responsible for paying your own taxes. You will need to register for Self Assessment with HMRC if you earn more than £1,000 from self-employed income in a tax year. You will also need to pay Class 2 and Class 4 National Insurance contributions. Class 2 contributions are a fixed weekly amount, while Class 4 contributions are a percentage of your profits.

Furlough and Freelancing

If you have been furloughed, you may be wondering whether you can take on freelance work to supplement your income. The good news is that it is possible to freelance whilst on furlough. However, there are certain things you need to be aware of before you start taking on freelance work.

Can You Work While on Furlough?

Yes, you can work while on furlough. However, there are restrictions on the type of work you can do. You can work for another employer, do volunteer work, or take on freelance work. However, you cannot work for your current employer while on furlough, as this defeats the purpose of the scheme.

Restrictions on Freelancing During Furlough

While you can take on freelance work while on furlough, there are some restrictions you need to be aware of. If you are on furlough, you cannot do any work that provides services to or generates revenue for your employer. This means that you cannot do any work that is related to your current job or that would benefit your employer in any way.

Flexible Furlough and Freelance Work

With the introduction of flexible furlough, you can now work part-time for your employer and take on freelance work at the same time. This means that you can work for your employer for part of the week and take on freelance work for the rest of the week. However, you need to make sure that the freelance work you take on does not interfere with your work for your employer.

Financial Implications

Freelancing during furlough can supplement your income, but it’s crucial to grasp the financial implications, including how it affects your furlough pay. The intricacies of managing freelance income and understanding its impact on furlough benefits are pivotal for maintaining financial stability.

Furlough Pay and Benefits

Firstly, it is important to note that while you are on furlough, you are still entitled to receive 80% of your usual wages, up to a maximum of £2,500 per month. This is known as furlough pay and is paid to you by your employer through the government’s Coronavirus Job Retention Scheme.

Freelancing Income on Furlough

If you decide to freelance while on furlough, any income you earn will be in addition to your furlough pay. It is important to note that your earnings from freelancing may affect the amount of furlough pay you receive, as your employer can only claim up to 80% of your usual wages.

However, there is a trading allowance of £1,000 per tax year that you can earn from self-employment or casual work without having to declare it to HMRC. Any income earned above this threshold must be declared to HMRC and will be subject to income tax and National Insurance contributions.

Government Grants and Support

It is also worth noting that the government has provided several grants and support schemes for self-employed individuals during the COVID-19 pandemic. These include the Self-Employment Income Support Scheme (SEISS) and the Small Business Grant Fund (SBGF).

Rights and Responsibilities

As a furloughed employee, you have rights and responsibilities that you need to be aware of if you are considering freelancing during this period. Here are some important things to keep in mind:

Employment Contracts and Furlough

If you are considering freelancing while on furlough, it is important to review your employment contract to ensure you are not in breach of any terms or conditions. Some contracts may prohibit you from working for another company or engaging in freelance work while on furlough. However, according to the government, furloughed individuals can freelance in situations where their current contract permits them to do so. If you are unsure about your contract, it is best to seek legal advice before taking on any freelance work.

Training and Development While Furloughed

While on furlough, you are allowed to undertake training and development courses to improve your skills or learn new ones. This can be a great opportunity to enhance your professional skills and make yourself more marketable in your field. However, you should be aware that any training or development you undertake must not be used to generate income for your employer or provide services to your employer.

Contact with Employers During Furlough

As a furloughed employee, you are not allowed to provide any services to your employer. This includes answering work-related emails or phone calls. However, you are allowed to keep in touch with your employer to discuss your furlough status, any changes to your employment contract, or any other work-related matters. If you are unsure about what you can and cannot do, it is best to seek legal advice.

Before pursuing freelance work, reviewing your employment contract is advisable to avoid breaches. The government guidelines for furloughed individuals provide a legal framework for freelancing under these circumstances. Furthermore, engaging in training and development while furloughed can enhance your skills without infringing on your employer’s terms.

Navigating the Job Market

If you are currently on furlough, you may be wondering if you can take on freelance work. The good news is that it is possible to freelance whilst on furlough, but there are certain things you need to be aware of before you start taking on freelance work. In this section, we will explore some of the key considerations when navigating the job market while on furlough.

Seeking Freelance Opportunities

If you are considering taking on freelance work while on furlough, it is important to ensure that your existing contract allows you to do so. According to the government guidelines, furloughed individuals can freelance in situations where their current contract permits them to do so.

To find freelance opportunities, you can search for jobs on freelance websites or reach out to your network to see if anyone is in need of your services. It is important to note that you should not actively seek work from your employer while on furlough, as this may be a breach of your contract.

Balancing Multiple Employers

If you decide to take on freelance work while on furlough, it is important to ensure that you are not in breach of your contract with your existing employer. This means that you should not take on work that conflicts with your existing employment, and you should ensure that you are not working more hours than you are permitted to under your furlough agreement.

Transitioning Back to Work

If you have been on furlough and are now transitioning back to work, it is important to ensure that you are fully prepared for your return. This may involve updating your CV, reaching out to your network to let them know that you are available for work, and preparing for interviews.

Exploring freelance opportunities necessitates adherence to your contract’s stipulations. Platforms offering guidance on finding freelance work can be invaluable resources. Additionally, balancing multiple employers requires careful consideration to not overstep contractual limitations.

Legal and Ethical Considerations

Understanding no-compete clauses and ensuring compliance with HMRC regulations underscore the legal and ethical landscape of freelancing during furlough.

Understanding No-Compete Clauses

If you have a no-compete clause in your employment contract, you may be restricted from working for competitors or starting your own business. However, the government has confirmed that furloughed employees can take on work for other employers without breaching their contracts. This means that you can freelance whilst on furlough as long as it does not breach any of the terms of your employment contract.

Voluntary Work and Furlough

You can also do voluntary work whilst on furlough, as long as it does not provide services to or generate revenue for your employer. This means that you can volunteer for a charity or community group, as long as it is not related to your employer’s business. However, you should be aware that if you are receiving any payments for your voluntary work, you will need to report this to HMRC.

Compliance with HMRC Regulations

If you are freelancing whilst on furlough, you will need to ensure that you are registered for PAYE Real Time Information and that you are complying with HMRC regulations. This includes ensuring that you have adequate liability insurance in place and that you are paying the correct amount of tax on your freelance income. If you are unsure about your tax obligations, you should seek legal advice or consult HMRC directly.

Support and Resources

If you are a freelancer who has been furloughed due to the COVID-19 pandemic, you may be wondering what support and resources are available to you. In this section, we will provide you with information on the different types of support and resources that can help you during this difficult time.

Government and Financial Support

The UK government has introduced a number of measures to help individuals and businesses during the COVID-19 pandemic. One of these measures is the Job Retention Scheme, which allows employers to claim a grant to cover a percentage of their employees’ wages while they are furloughed. If you are a freelancer who has been furloughed by your employer, you may be eligible for this scheme.

To claim the grant, your employer must have made a PAYE Real Time Information (RTI) submission to HMRC between 20 March 2020 and 2 March 2021 which included your details. The grant covers 80% of your usual wages, up to a maximum of £2,500 per month. Your employer can choose to top up your wages to 100% if they wish.

In addition to the Job Retention Scheme, the government has also introduced other financial support measures, such as loans and grants, to help businesses during this time. You can find more information on these measures on the government’s website.

Professional Advice and Guidance

If you are unsure about your legal rights and obligations as a freelancer who has been furloughed, or if you need advice on how to manage your finances during this time, it may be helpful to seek professional advice and guidance.

There are a number of organisations that can provide you with legal and financial advice, such as the Citizens Advice Bureau and the Money Advice Service. You may also wish to consult with an accountant or financial advisor who can help you manage your finances and make the most of any government support that is available to you.

In addition to professional advice, there are also a number of online resources that can help you during this time. For example, the HMRC website provides information on how to claim the Job Retention Scheme grant and other financial support measures.