Selling your time as prepaid units

Some freelancers and small studios sell their time in units that the client pays for first. The client then draws on those units, one piece of work at a time.

Step 1

Decide what one unit is

A unit can be a length of your time, such as an hour. It can also be a finished piece, such as one edited article.

Anthropic, which makes the Claude models, says AI tokens "are the smallest individual units of a language model". A unit of your time counts your own work.

Step 2

Write the terms down

Put in writing what one unit buys, how long unused units last and what happens to them if the client stops.

Some clients will be consumers, meaning individuals buying for purposes wholly or mainly outside their trade. If you agree a contract with one online, by phone or away from your premises, the Consumer Contracts Regulations 2013 apply. Before the client is bound, you must give them the information the Regulations list. That includes their right to cancel.

A consumer can usually cancel a service contract within 14 days of agreeing it. You must not begin the work in that time unless the client expressly asks you to. If they then cancel, they pay for what you supplied up to that point, in proportion to the whole contract. Once the whole block has been used, the right to cancel ends.

If you did not tell them about the right to cancel, they bear none of that cost. Leaving that information out also keeps the cancellation window open for as much as a further 12 months.

Schedule 2 of the Consumer Rights Act 2015 lists terms in consumer contracts that may be unfair. Paragraph 4 describes keeping a consumer's payment when they pull out, without promising them the same sum if you are the one who pulls out. Section 62 says a consumer is not bound by an unfair term.

Step 3

Keep a log

For each piece of work, note the date, what you did and the units it used.

A made-up log for a block of 10 units, where one unit is one hour:

DateTaskUnits usedUnits left
3 MarchFirst draft of four product pages37
10 MarchChanges after the client's comments16
24 MarchNewsletter, written and checked24

A client log sits beside your own tax records. GOV.UK says sole traders and partners must keep records of all sales and income for Self Assessment. Those records must be accurate. They must be kept for at least 5 years after the 31 January submission deadline of the tax year they cover. Limited companies have different rules.

Step 4

Report to the client

Send the log at a regular point, such as the end of each month, with the units used and the units left.

If you and the client are both registered for VAT, GOV.UK says you need to give them an invoice by law.

If you are registered for VAT, the tax point matters too. A tax point is the date you have to account for VAT on a sale. HMRC says that for an advance payment, the tax point is the date you issue a VAT invoice for it, or the date you receive it, whichever happens first.

Step 5

Say how AI tools were used

Tell the client in writing whether you used an AI tool, and for which tasks. Keep the statement true and specific.

Two made-up statements:

"I wrote this article myself. I used an AI tool to check spelling and grammar."

"An AI tool produced the first outline. I wrote the text from that outline and checked every fact."

When you advertise to other businesses, the Business Protection from Misleading Marketing Regulations 2008 prohibit advertising that misleads them. When you deal with consumers, the Digital Markets, Competition and Consumers Act 2024 treats giving "false or misleading information relating to a product" as a misleading action.

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