From salary to self-employed: Weighing up the cost of freelancing in the UAE

Meghna Dixit, a former freelancer in Dubai, warns against the misconception that freelancing is free. She emphasizes how many professionals underestimate the true costs of independence before securing their first client. In the UAE, the entry price for setting up a business legally starts at a few thousand dirhams for those with a valid residence visa, escalating to over Dh40,000 for a full first-year setup with a business license.

This includes permits, municipality fees, unemployment and medical insurance, as well as recurring platform charges. Visa and license fees are the initial costs, with licensed set-up providers pricing a professional services permit at Dh6,500 plus VAT. If you're invoicing through your company, a 2.49% processing fee from the platform will also apply.

Across the market, options vary: the Dubai Development Authority's GoFreelance permit costs Dh7,500, but including a residence visa, first-year totals range from Dh15,000 to Dh18,000. To gain trust from financial institutions, especially when applying for loans or business bank accounts, it's advantageous to register as an individual business.

Sharjah Media City offers a trade licence for Dh5,760, while DMCC's flexi-desk business package costs Dh43,780. Beyond the permit costs, freelancers must budget for numerous personal expenses, including health insurance, marketing and branding, professional development, software subscriptions, equipment, workspace, and accounting.

Additional costs may include professional indemnity insurance, e-invoicing systems, and vehicle insurance upgrades for business travel. Financial advisers emphasize the importance of saving and investing for the future, as freelancers often face unpredictable income. Obtaining credit becomes more challenging due to the fluctuating nature of freelance income, which lenders view as a higher risk.

Obtaining a mortgage also becomes more difficult, as lenders typically require three years of audited accounts. Health insurance is another significant, often overlooked cost, ranging from Dh1,000 to over Dh20,000 per year. Factors such as age, medical history, location, family size, and chosen deductibles determine the cost. Some providers offer premium lock add-ons to protect against standard age-related and medical inflation increases.

The emotional and mental costs of freelancing are equally significant, with the constant need to generate work, maintain visibility, and manage uncertainty often overlooked. To prepare for the transition, it's crucial to hold an emergency fund covering at least six months of essential living expenses and budget based on the lowest-earning months rather than the best ones.