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Before even getting the tax bill every year, freelancing has already become an expensive way to work and Protectivity puts a price on the workplace benefits that self employed workers give up, reaching thousands of pounds every year.

Platform fees for finding clients can also eat into earnings, which gives me the impression that maybe independent work is a lot more expensive than many people expect and think.

For a long time, freelancing sounded like the best bet because of the low entry costs. But it鈥檚 starting to look like this form of self-employment might even be more expensive than picking up a 9 to 5.

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How Much Does Freelancing Actually Cost?

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Protectivity did some research and found that the average self employed worker misses out on 拢6,428 worth of workplace benefits every year. The calculation covers things like paid annual leave, sick pay and employer pension contributions using the ONS median full time salary of 拢39,039.

The total counts 拢4,704 in paid annual leave, 拢740 in sick pay and 拢984 in employer pension contributions. Protectivity calculated that the average freelancer would need to work an extra 16.5 days, more than three working weeks, every year simply to match the value of those employment benefits.

The long term cost also becomes much higher as Protectivity estimates that missed employer pension contributions could grow into more than 拢119,000 in lost retirement savings through compound investment growth.

London records the highest annual gap at 拢8,243, meaning freelancers there would need to work an extra 21 days to receive the same value as an employee. Northern Ireland records the lowest gap at 拢5,157.

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Where Does The Money Go?

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Holiday pay accounts for the biggest missing benefit; employees receive 28 days of paid annual leave including bank holidays, but self employed workers must pay for every day they take away from work.

Sick leave can become expensive very quickly, and Protectivity said 79% of self employed people who took sickness absence during the last year received no income during that time. The research also reported that self employed workers take 35% fewer sick days than employees because they cannot afford time away from work.

Tax planning becomes a regular expense throughout the year and with the second HMRC Payments on Account deadline falling on 31 July, this leaves many freelancers preparing for tax payments while also funding pensions, savings and insurance without employer support.
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Aaron Gilmore, Founder and Strategic Tax Advisor at TreyBridge Accountants, said, 鈥淢ost people are aware they no longer receive paid holidays or company sick pay, but many underestimate the true value of the wider package that employers provide. Pension contributions, income protection and paid leave can collectively be worth many thousands of pounds each year and when you鈥檙e self-employed, replacing that value is entirely your own responsibility.

鈥淯se this period as an opportunity to review not only tax liabilities but also wider financial resilience. Assess whether pension contributions are on track and consider whether there are sufficient reserves in place to cover periods of reduced income. The most successful self-employed individuals tend to be those who treat financial planning as an ongoing process rather than a once a year exercise.鈥�

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Are Freelancers Paying Simply To Find Work?

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Finding clients now comes with its own price for many freelancers.

I went through freelance marketplace Upwork recently and found that many freelancers now spend money on the platform鈥檚 Connects tokens before they can apply for jobs. Applications often need paid Connects, meaning workers spend money before earning anything. Many freelancers have also reported that people buying extra Connects seem to get more visibility and submit more applications, which makes competition much tougher for those using only the free monthly allowance.

Those platform costs come before invoices are even issued. Freelancers already pay for holidays, pensions, sick leave, insurance and tax bills themselves. And spending money simply to compete for work creates one more expense that employees rarely face.

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Why Do People Keep Choosing Self-Employment?

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The financial burden that it comes with has not stopped people choosing self employment. Protectivity said self employed workers contributed 拢366 billion to the UK economy during 2024. The company also referenced research showing that more than half of freelancers say their work life balance improved after leaving traditional employment.

Amy Stringer, who has run her jewellery and ceramics business for more than ten years, said, 鈥淚鈥檝e been self-employed for over ten years now and I genuinely wouldn鈥檛 change it. The freedom to build something that鈥檚 entirely your own, on your own terms, is something I find really fulfilling. But there are real financial realities that come with that choice that I don鈥檛 think people always talk about openly enough.

鈥淲hat I鈥檝e learned over the years is that being self-employed means you have to think like your own HR department, your own finance team and your own pension provider all at once. It鈥檚 completely manageable once you get your head around it, but I do think there鈥檚 a real need for more honest conversation about the financial side of going it alone, not to put people off, but to help them go into it with their eyes open and properly prepared.鈥�

Chris Trotman, Head of Sales and Underwriting at Protectivity, said, 鈥淪elf-employed workers are an essential part of the UK economy, and it鈥檚 clear that the vast majority wouldn鈥檛 trade the flexibility or autonomy that working for themselves allows. It does, however, come with financial risks that employment automatically absorbs and a lot of people don鈥檛 fully grasp the scale of that gap until they鈥檙e up against it.

鈥淯nderstanding the true value of what you鈥檙e not receiving is the first step towards putting the right protections in place to mitigate the impact. That includes saving a comfortable portion each month for planned time off, periods of sickness, and pension contributions, whilst also making sure you have the right business insurance in place to minimise risk and protect what you鈥檝e worked so hard to build. The sooner freelancers build those foundations, the stronger their overall position becomes.鈥�