The Short Answer
Should a startup hire a freelancer, an agency or an in-house developer?
Hire a freelancer for well-defined work when someone on your side can review it. Use an agency or studio when you need several skills, a fixed price and a team that manages itself. Hire in-house once the product has proven demand and needs continuous development for years, because only then does a salary pay off.
The Three Routes Compared
| Freelancer | Agency or studio | In-house | |
|---|---|---|---|
| How you pay | Day or hourly rate | Fixed price or time and materials | Salary plus employer costs |
| Skills | One person’s | Design, development, testing, project management | Whoever you hire |
| Who manages the work | You | The agency | You, or a lead you hire |
| Speed to start | Days to weeks | Weeks | Months to recruit |
| Continuity | Risk if they leave | Team can change; knowledge stays with the agency | Highest, if you keep them |
| Code ownership | Needs a written assignment | Needs a written assignment | Yours automatically for work done in the job |
| Best for | Defined tasks with a reviewer | An MVP or a defined product | A proven product with a long roadmap |
What Each Costs in the UK
| Role | 25th percentile | Median | 75th percentile |
|---|---|---|---|
| Senior developer, London contract (per day) | £500 | £650 | £788 |
| Software developer, UK contract (per day) | £428 | £525 | £575 |
| Full-stack developer, London permanent (per year) | £55,000 | £65,000 | £85,000 |
Sources: ITJobsWatch for London senior contracts, UK software developer contracts and London full-stack jobs. These are asking rates in adverts, not invoices.
A salary is not the cost of an employee. At the £65,000 London full-stack median, employer National Insurance at 15% above £5,000 adds £9,000, and the 3% minimum pension on the £6,240 to £50,270 qualifying earnings band adds about £1,321: roughly £75,300 a year before recruitment fees, equipment and benefits. A London senior freelancer at the £650 median costs £39,000 for 60 working days, which buys a focused MVP's worth of one person's time.
Agencies price differently: Clutch reports most software projects cost $10,000 to $49,999, and many quote a fixed price for a defined scope. Loomstrat Studio, for reference, publishes $15,000 to $30,000 for a rapid MVP. For comparing agency quotes, see what a $15k MVP includes vs a $50k quote.
Who Owns the Code
Do I own code written by a freelancer or agency?
Not automatically. Under UK copyright law, work an employee creates in the course of their job belongs to the employer, but a freelancer or agency owns the copyright in what they write unless they assign it to you. An assignment is only effective if it is in writing and signed.
The rules are in the Copyright, Designs and Patents Act 1988: section 11 gives employers ownership of work made by employees in the course of employment, and section 90(3) says an assignment of copyright is not effective unless it is in writing and signed by or on behalf of the assignor. This is the single most important clause in any freelancer or agency contract; see what to include in a software development contract.
IR35 and Contractors
If you hire a freelancer who works through their own limited company, the off-payroll working rules (IR35) apply. In most cases the client decides whether the contractor would be an employee if engaged directly. If your company is small and in the private sector, the contractor's own company decides instead.
In practice, a freelancer engaged for a defined deliverable, using their own methods and equipment, is the lower-risk pattern. A freelancer working full-time, indefinitely, under your direction, looks more like an employee, and that is often a sign you are ready to hire one.
The Hidden Cost: Management
Freelancers are cheapest per day and most expensive in founder time. Someone has to write the tasks, review the work, test it and decide what comes next. If that someone is a non-technical founder, the savings often go into rework.
Agencies include that management in the price, which is much of why they cost more per hour. In-house developers need management too, and the first hire usually needs someone senior to set direction; a fractional CTO often fills that gap.
Choose Your Route
Interactive tool
Freelancer, agency or in-house?
Five questions. The bars show which route your answers point to; the reasoning is in the guide below.
1.Is the scope written down and unlikely to change much during the build?
2.Can someone on your side review code and manage a developer day to day?
3.Will the product need continuous development for years, starting now?
4.Does the build need several skills (design, front end, back end, testing)?
5.Do you need a fixed price and date before starting?
Answer all five questions to see where your answers point.
The Route Usually Changes Over Time
| Stage | Usual route | Why |
|---|---|---|
| Testing demand | No-code, or a small fixed-price MVP from a studio | Cheapest way to a real answer |
| First version with paying users | Agency or studio, with a fractional CTO if needed | Several skills, defined scope, little management load |
| Proven product, steady roadmap | First in-house engineers, agency for peaks | Continuous development now justifies salaries |
| Scaling | In-house team; freelancers for specialist work | Knowledge and speed stay inside the company |
Whatever the route, the repository, cloud accounts and IP should be yours from the first day, so that moving between routes is a handover rather than a rescue. See software ownership, and for the move in-house, hiring your first engineer. For a fixed-price build with full handover, see Loomstrat's MVP development.
Frequently Asked Questions
Is a freelancer or an agency better for an MVP?
An agency or studio is usually better if you are non-technical, because an MVP needs design, development and testing and someone has to manage the work. A freelancer can be cheaper if the scope is clear and someone on your side can review code.
How much does a freelance developer cost in the UK?
ITJobsWatch reports a UK median of £525 a day for software developer contracts and £650 a day for London senior developer contracts, in adverts for the six months to 19 October 2026.
How much does an in-house developer cost in the UK?
A London full-stack developer at the £65,000 median salary costs about £75,300 a year once employer National Insurance and the minimum pension are added, before recruitment fees, equipment and benefits.
Do I own code written by a freelancer?
Only if they assign it to you. Under the Copyright, Designs and Patents Act 1988, s90(3), an assignment of copyright must be in writing and signed. Work by employees in the course of their job belongs to the employer under s11.
Does IR35 apply when I hire a freelance developer?
It can, if they work through their own limited company. In most cases the client decides their status; if your company is small and in the private sector, the contractor’s company decides.
When should a startup hire in-house developers?
Once the product has proven demand and a roadmap that needs continuous development. Before that, a salary commits you to costs before you know what you need to build.
Choose the route that matches how clear your scope is and who will manage the work, own the code whichever you choose, and expect to change routes as the product grows.