December is here and the official countdown to Christmas Day has begun. Whilst being many peoples favourite time of the year, the Christmas season is often a hectic couple of weeks because of last-minute shopping trips, work parties, social gatherings and family get-togethers. Christmas is likely to be extra demanding on freelancers and contractors because of their busy schedules and financial pressures. To make their lives easier, Bluebird Accountancy has come up with 3 tips to help freelancers and contractors make the most of the Christmas season.
Reducing the financial burden of your Christmas party
If you are the director of a limited company, were you aware that you can claim tax relief on up to £150 (plus VAT) per attendee of your Christmas party? This covers the price of accommodation, the entertainment that is provided, the travel to and from the event and the food and drinks consumed.
Many of our contractors operate as the sole employee of their business but you won’t be expected to have a Christmas party alone! You can invite your partner or spouse to your Christmas celebration and the tax relief still applies. However, your Christmas Party must be open to all of your employees (if there are more than just you) and you are not allowed to invite clients if you are looking to take advantage of the tax relief. Don’t forget – you must keep every receipt.
Please be aware that you can only claim this tax relief if your Christmas party works out at no more than £150 per head. If for example, your Christmas party costs £155 per head, the £155 is taxable as a benefit in kind. You must also include income tax, employers National Insurance and employees National Insurance.
Did you know? – You can put the £150 tax allowance towards more parties throughout the year. However, the total cost per head for every gathering must not surpass £150. For example, if your summer party cost per head is £70 and your Christmas party cost per head is £60, the total cost per head is £130 and you can claim the tax relief. If on the other hand you decide to have three staff parties throughout the year and the average cost per head of each is £55, your total cost per head for the year is £165 and you cannot claim any tax relief.
Making the most of your annual leave
If your assignment is outside IR35, booking your holiday is easy because your client is not officially your boss and therefore you can choose to take time off when you wish. However, you must make sure you can complete the work expect of you in the agreed timeframe. Please be respectful to your client and keep them updated with your plans. Whilst they are not technically your boss, they are paying you and deserve your respect.
If your contract is inside IR35, you might be subject to Supervision, Direction or Control and subsequently will have to abide by your clients holiday booking procedures.
One of the infamous “disadvantages” of contracting is the lack of holiday pay. However, if you plan your savings carefully, this will avoid a lack of cash over the Christmas period.
Did you know? – When working through an umbrella company, some of your pay will be put aside as Holiday Pay and this will appear on your weekly or monthly payslip. Every umbrella contractor is entitled to 28 days of paid annual leave and the amount of Holiday Pay you accrue is dependent on the number of hours you have worked. If you are not working more than 35 hours a week, you may want to put some extra savings aside for your Christmas festivities.
Manage your calendar carefully
Christmas should be a time for relaxing, socialising and putting your feet up in the warmth of your living room. In order to achieve this, you must take care of your paperwork well in advance. Make sure you do the following at your earliest convenience:
- Submit your outstanding timesheets
- Claim any expenses you are entitled to
- Invoice your clients
- Send out appropriate reminders to chase outstanding payments due
- Check your calendar to ensure you are not double booked over the holidays
Did you know? – If you are contracting through a limited company, you will be required to submit your Personal Tax Return for 2016/17 by the end of January 2018. Every Bluebird Accountancy client can benefit from our Personal Tax Return service that is included in our accountancy package at no extra cost.
Please keep checking the Bluebird Accountancy blog for more useful tips to help freelancers and contractors.