Freelancers urged to negotiate better deals on everything from day rates to energy bills – before tax and interest rate hikes kick in.
What freelancers should negotiate now:
- Mortgage rates and whether it wll pay off staying or switching to a new provider
- Credit cards and loans – how much could you save with a balance transfer deal?
- Your day rate or project fee – are you valuing your time correctly? Are your clients?
- Energy rates – could going green save you money and convenience?
Ahead of the Bank of England’s interest rate decision later this week, the majority of freelancers, contractors and small business owners will naturally react negatively to any hike in rates. They must be thinking, how will I make ends meet if I am also expected to pay higher national insurance, dividend and corporation taxes?
That said, there is another camp of freelancers willing to take a more proactive mindset when it comes to renegotiating their day or project rates, economising their daily spending and shopping for better deals when it comes to their credit card, loan and mortgage providers.
If you cringe at the thought of talking about money or negotiating your pay with your client, then you should seriously think about how you can change your stance on that. We’d sometimes negotiate better for a friend or stranger than we would ourselves.
Long-term freelancer and copywriting business owner Sarah Townsend states in her book, Survival Skills for Freelancers, “If you don’t value yourself, your clients won’t, either.”
How are the self-employed responding to an interest rate hike?
“As someone whose mother lost her home due to the stratospheric interest rates of the late 80s (think circa 14%), I am sanguine about micro-increases in interest rates,” says Sarah Loates, Director of Loates HR Consultancy (pictured left).
“In the grand scheme of things, these are minuscule adjustments. Yes, inflation is skyrocketing but much of that is adjustments from the bust of lockdown to the post lockdown boom as opposed to a sharp jump in consumer prices. I’m confident inflation will settle back down, and the impact on interest rates long term will be negligible,” says Loates.
Martin Stewart, director of London-based independent mortgage broker, London Money, is not so convinced that the rise in interest rates won’t have a wider impact on the economy.
“The Bank of England categorically should not raise interest rates, or at least not yet, ” says Stewart.
“Post ‘Credit Crunch’, we have created a highly leveraged world but also a highly sensitive one. One wrong move now by Threadneedle Street and it will be roadkill for Christmas lunch, not turkey,” he says.
Bev Wakefield, director at Derby-based Vibrant Accountancy is also not keen on an interest rate hike: “A hike in interest rates will feel like a kick in the teeth for small business owners, just as they are getting their heads around a rise in National Insurance and Dividend Tax, plus the known increase in Corporation Tax to follow. An increase in interest on borrowings is the last thing anyone needs right now.”
Is it time to re-mortgage?
Competition in the UK mortgage market is heating up, which is good news for those looking to switch to a better deal while interest rates are at record lows. Clearing banks that are sitting on cash are eager to lend and that is what is feeding the record low rates, even now, when the Bank of England might consider a slight rise in interest rates.
One example is the Co-operative Bank, which has launched a record low two-year fixed rate deal, with an interest rate of 0.79%. The deal is via the bank’s mortgage brokers service, Platform.
Platform’s 0.79 %, rate, however, is limited to borrowers seeking a loan of 60 % or less of the property value and comes with a fee of £1,499. The lender also offers a 0.84 per % deal at a lower £999 fee. Sometimes spending a little more now in fees works out more cost-efficient over the course of a mortgage if it seals at a low rate. It is worth checking out other mortgage providers offering sub-1% deals, such as Halifax* and Nationwide.
Based on a £167,000 property borrowing £125,000 over 25 years, there are some deals to be had under the 1.5% mark, according to financial education and product comparison site, Which? These deals offer a Loan To Value (LTV) of 75%.
It may be wise to get a free valuation of your property before you start shopping around for mortgages as this will impact your LTV. While using sites, such as Zoopla to give you a rough estimate of what your house might be worth, this will not take into consideration any improvements you may have made to the property since you bought it. What it does do is give you an indication of what houses are going for in your area and how that may have an impact on your property price. A mortgage lender will also do their own valuation before signing over a mortgage.
If you can get a great deal from your existing lender, if you are nearing the end of your mortgage period, this may be the quickest way to a better deal. You have already built up a history with them so may be able to avoid the whole application process.
Plus, if you get your property revalued, you can still gain the advantage of the higher valuation of your property if you stay in your existing property or choose to sell it with a view to stay with the same mortgage lender when buying a new property.
Balance transfer your credit debt – when is it worth switching?
Whenever you apply for a new credit card even a balance transfer, it counts as a hard inquiry on your credit report, according to The Motley Fool.
“A single hard inquiry will drag your score down by a handful of points. However, if a balance transfer saves you a lot of money on interest, then it’s worth doing. And having your score drop by, say, six or seven points may not really have much of an impact,” said the personal finance site.
Taking everything into account, some balance transfer deals could make it easier for you to pay off your existing credit card debt faster. And that could raise your score by lowering your credit utilisation ratio, which measures how much of your available credit you’re using at once.
0% Balance Transfer Credit Cards up to 29 Months | MoneySuperMarket
Tips to reassess your day rate or project fees
“If you don’t value yourself, your clients won’t, either.”
Sarah Townsend, author of Survival Skills for Freelancers
“You may not feel comfortable with doubling your rates (though I know business coaches who would give the same advice) but increasing your prices can be a sound principle,” says author Sarah Townsend.
“By charging more, you’re putting a higher value on your time,” says Townsend.
This move, even if it means putting up your rates just 50%, could mean more time for yourself and your family, but also more dedication to the clients that value your time and what you produce. Some clients may not value your time and efforts or they simply don’t have the budget. You have to make the decision if this is the type of client you really want to do business with long term or just ad hoc when it suits you. That’s the beauty of freelancing, you can pitch at any time.
The process of valuing your time and expertise will enable you to put more meaning into the work that you do have and that can be worth its weight in gold when it comes to client testimonials.
The Freelance Informer
Changing your rate in uncertain times
When the economy is rocky, sometimes clients will cut back on using freelancers. This was the case at the onset of the pandemic and as a result, freelancers cut their rates.
Freelancers cut their own day rates to £397 in the second quarter from £445 in the first quarter — lower than during the pandemic and lowest overall since 2018, according to a report released by IPSE.
IPSE reported during this time frame there are fewer contracts available, prompting freelancers to cut their rates. IR35 was a contributing factor for the decrease in contracts. But now that the economy seems to be closer to the light at the end of the tunnel with the COVID pandemic, many freelancers feel they can start to up their rates.
Male freelancers may be the first to jumpstart on this Men consistently negotiate a pay rise, while women often accept what is offered, according to Karina Collis, a professional negotiation expert and founder of Liinea Sales Advisory.
Moreover, women will negotiate their relevant salary less often, which generates a vicious circle over the course of a career. Collis offers some tips and steps to successful salary negotiation.
Read our report on How To Negotiate Higher Rates.
Negotiate or switch to a better energy deal
At the time of writing, energy companies and the government had agreed that the energy price cap must “remain in place” during crunch talks to find a solution to record gas costs.
Business secretary Kwasi Kwarteng held a crisis meeting with the industry before announcing to the Commons ministers would not be bailing out energy firms and the energy price cap would be “staying”.
Speaking in the Commons, Mr Kwarteng said: “Obviously, the global gas situation has had an impact on some of our energy suppliers. We’ve already seen four suppliers exit the market in recent weeks and we may well expect to see further companies exiting the market over the coming weeks.”
This situation could mean now is the time to look for a better deal before you crank up the heating.
Energy price comparison sites can give you an idea as to whether you are paying too much for your energy use, especially if you work from home. Which? Switch is an independent comparison service and automatically displays deals that it can’t switch you to directly – so you know you’ll see the best deals and where to get them from.
Automatic switching services do more of the legwork for you than price comparison websites, according to Which?
“They continuously compare and, with your permission, switch you to deals they calculate to be the best (based on the information you provide) to keep you on a good rate. Well-known names include Flipper, Look After My Bills, Switchcraft, Switchd and Weflip, though more are launching all the time. If you want a better energy deal with minimal effort, they could be worth a try. But be aware that you may not get the very cheapest deal on the market,” says Which?
Those freelancers that live in rural locations may only have the choice to be green when it comes to their electricity and will have to shop around for oil suppliers.
FuelTool and BoilerJuice are two options.
Does it pay to go green? And which suppliers are in financial trouble?
While you may want to go green, it is important you check any news stories on your favourite supplier as they could be among those in financial trouble. For example, T3 rated just weeks ago Bulb as the best green energy supplier in the UK. Bulb is now seeking a government bailout.
It’s thought many smaller firms could collapse in the coming days as firms crumble under the weight of surging wholesale costs.
Rest assured, if your energy provider folds, your energy won’t be cut off, so there’s no need to panic. In the meantime, Ofgem will arrange an interim supplier so you won’t have to go without it.
Octopus Energy has been rated best for green energy supplier customer service – and for the second year running, it’s a Which? Recommended Provider too.
Octopus has been selected by Ofgem as the Supplier of Last Resort (SoLR) for several other energy suppliers that have gone bust, apparently being seen by the regulator as a safe pair of hands for those in need of a provider.
Green Energy UK may be the only supplier to offer 100% green gas as well as green electricity, making it the only true green energy supplier in the UK, but you’ll pay more. If you are with Green Energy UK or thinking of switching to them it is important to know that they are exempt from the Ofgem price cap. In fact, the provider was 38% more expensive when T3 did a price comparison of all the suppliers mentioned in their green energy guide.
Other green suppliers include Outfox the Market, Npower, Ecotricity, Ovo Energy, among a few others. You can also ask traditional energy suppliers what their green tariff is like.
Don’t have mains heating?
Over 1.5 million homes in the UK rely on heating oil, according to Nationwide Fuels. Given an average of 4 people per home, it means that approximately 6 million people require heating oil for warm water and central heating.
Those freelancers that live in rural locations may only have the choice to be green when it comes to their electricity and will have to shop around for oil suppliers when it comes to heating their homes.
FuelTool and BoilerJuice are two options to compare suppliers. Many rural villages also have an oil cooperative so they can buy in bulk and negotiate a better price.
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