As a freelancer, preparing for time off – especially around the Christmas period – requires careful planning.

Unlike employees with paid holiday leave, freelancers don’t earn when they are not working.

That is why setting your rates correctly from the start is essential to ensure you can afford to take time off without compromising your income.

One often-overlooked aspect of freelancing is adjusting your rates, not only to reflect your experience and expertise but also to cover your time off.

The hidden cost of time off

Many freelancers focus on their day rate when calculating income, but the reality is you are unlikely to work every day.

Holidays, sick leave, and time spent on non-billable tasks like admin can quickly eat into your earnings.

Here is a breakdown of what you should consider when setting your rates:

• Annual leave: The UK statutory minimum for holiday entitlement is 28 days, and this should be factored into your calculations.
• Sickness: Everyone gets ill occasionally, so realistically plan for at least five days off during your contract due to sickness or adjust based on your own health.
• Admin: Whether it is chasing invoices, managing clients, or marketing yourself, non-billable tasks take time. It is reasonable to assume you will spend at least one day per week on these tasks, which is time that must be accounted for.

When you consider these factors, your day rate may not seem as generous as it first appeared.

Accounting for time off at Christmas

The Christmas season often sees an increase in time off, whether for personal holidays or slower work schedules.

If you know you will need extra time off during the festive period, factor this into your rate calculations.

For example, if you are likely to work fewer days in December, reduce the number of working days in your calculation to ensure you are still hitting your target income.

Setting rates with clients

If adjusting your rates for the new year or upcoming holidays, transparency with your clients is crucial. Make sure you:

• Give notice: Let your clients know about rate changes in advance, ideally a month or more, to give them time to adjust their budgets.
• Be clear: Explain the reasons behind the increase, such as accounting for time off or reflecting your growing expertise.
• Offer flexibility: For long-term clients, consider offering package deals or retainers to soften the impact of a rate increase.

By setting your rates correctly at the start of your contract, you can comfortably take time off at Christmas without worrying about lost income.

Properly accounting for holidays, sick leave, and non-billable tasks ensures that your rates are sustainable, and you will not have to play financial catch-up during the festive season.

Start planning now, and you will be able to enjoy the holidays with peace of mind, knowing your finances are in good shape come the new year.

Labour’s recently published Employment Rights Bill brings significant changes to the UK’s employment landscape.

While it has been lauded for its worker-focused reforms, it has left several key issues for contractors unresolved.

Understanding how this bill impacts contractors, particularly those operating through umbrella companies or self-employed structures, is crucial for staying compliant and managing your working arrangements effectively.

Here is what you need to know about the bill and its implications for contractors.

No immediate changes to IR35 or umbrella company regulation

One of the biggest disappointments for contractors is the absence of any provisions to address IR35, Off-Payroll Working rules, or the regulation of umbrella companies. Despite earlier discussions of reform, the bill remains silent on these issues.

This means the current rules stay in place, and contractors will need to continue navigating the complexities of IR35 without additional support from new legislation.

If you operate inside IR35, you will continue to pay taxes similar to an employee but without access to employee rights.

The promised consultation on a simpler employment status framework is yet to be scheduled, leaving contractors in a state of uncertainty.

Day-one rights for unfair dismissal

A major highlight of the bill is the introduction of day-one rights for unfair dismissal. Currently, employees must have two years of service to qualify for this protection.

For contractors, this change isn’t directly applicable unless you are considered an employee or work through an umbrella company with employment rights.

While this move is aimed at providing better protection for workers, it may encourage businesses to rely more on flexible, temporary staffing solutions, which could increase the demand for contractors.

This could lead to an uptick in the use of umbrella companies or temporary contracts, so contractors should be prepared to take on more flexible roles as businesses adapt to these changes.

Changes to zero-hour contracts and agency workers

The bill introduces new protections for those on zero-hour contracts (ZHC), including rights to guaranteed hours, reasonable notice, and payment for cancelled shifts.

While these changes are geared towards ZHC workers, they could indirectly affect agency workers and contractors operating in flexible work arrangements.

Contractors engaged through agencies may experience knock-on effects from these reforms, especially if they are paid based on hours worked.

If you work via an umbrella company or through an agency, you may see changes in how your shifts are managed, but the specifics for contractors are still unclear.

Single Worker Status

The idea of a Single Worker Status (SWS) is being floated as part of the bill, which aims to simplify the distinction between employees, workers, and the self-employed. Although there is no clear timeline for when this will happen, a formal consultation is expected.

SWS could simplify the tax and employment rights framework, potentially providing more clarity and rights for contractors, but it is still in the early stages.

Keep an eye on the development of SWS, as it may streamline your employment status and align your tax obligations with your rights.

However, the uncertainty surrounding this consultation means no immediate changes are expected.

Consultation on contractor-specific issues delayed

Despite the excitement surrounding the publication of the bill, key contractor concerns, such as umbrella company regulation and IR35, have been delayed.

Labour has promised to consult on these issues, but no details have been released on when or how these consultations will take place.

This delay leaves contractors in a frustrating position, as many of the long-standing challenges in the sector remain unresolved.

While there is hope that Labour will eventually address contractor-specific issues, you will need to continue managing your current obligations under existing rules until more concrete proposals are put forward.

What should contractors do now?

Although many of the changes in the bill do not directly impact contractors at this stage, it is important to stay informed and prepare for potential reforms. Here are a few steps you can take:

• Review your current arrangements: If you are operating through an umbrella company or self-employed, ensure your arrangements are compliant with the latest IR35 rules and employment law.
• Stay informed about Single Worker Status: Keep an eye on government consultations regarding SWS, as it may impact your employment status and rights in the future.

Labour’s Employment Rights Bill introduces significant reforms, but many of the issues most relevant to contractors – such as IR35, umbrella company regulation, and employment status – have been delayed or left out.

For now, contractors must continue to manage their affairs under the current rules, while keeping a close watch on future developments.

By staying informed and working closely with an accountant, contractors can remain compliant and prepared for the changes to come.

***PLEASE IGNORE THIS REMINDER IF YOU HAVE ALREADY SENT US YOUR QUESTIONNAIRE***

If you would like Cogent to prepare and file your 2023/24 tax return and you have not yet sent us your completed Self-Assessment Tax Return Questionnaire, please do so as soon as possible.

If you have a second shareholder, they may also need to file a tax return, even if they haven’t previously. For further advice, please contact our Tax Department.

Penalties for late filing of tax returns can be as much as £1,600, even when there is no tax due, so please ensure your tax return is filed on time, whether you ask us to prepare it for you, or you have made other arrangements.

You can request a questionnaire for 2023/24 by emailing tax@cogentaccountants.co.uk

Please return your completed questionnaire together with any attachments by email only to our Tax Department – tax@cogentaccountants.co.uk

You are required to file a tax return if:

• You have been asked to file one by HMRC
• You have a tax liability for the year (e.g. additional and higher rate tax, student loan in repayments, high-income child benefit charge or if you have any income which has not been taxed at source)
• You have a new source of income that needs to be declared.

***PLEASE IGNORE THIS REMINDER IF YOU HAVE ALREADY SENT US YOUR QUESTIONNAIRE**

***PLEASE IGNORE THIS REMINDER IF YOU HAVE ALREADY SENT US YOUR QUESTIONNAIRE***

If you would like Cogent to prepare and file your 2023/24 tax return and you have not yet sent us your completed Self-Assessment Tax Return Questionnaire, you will need to do so by 30 September 2024 to benefit fully from our discounted fee.

If you have a second shareholder, they may also need to file a tax return, even if they haven’t previously. For further advice, please contact our Tax Department.

The standard charge including VAT for a basic tax return is £250. Questionnaires received by 30 September 2024 will receive the full discount on a basic tax return, charged at £95.

If your questionnaire is received between 1 October and 31 December 2024, the fee will be discounted to £130; any returns received after 31 December 2024 will be charged at the full rate of £250.

Please note, that more complicated tax returns where additional work or supplements are required, will be subject to additional charges.

Our deadlines have been set so that we can complete your return in time to meet the HM Revenue & Customs’ (HMRC) online filing deadline of 31 January 2025.

Penalties for late filing of tax returns can be as much as £1,600, even when there is no tax due, so please ensure your tax return is filed on time, whether you ask us to prepare it for you, or you have made other arrangements.

You can request a questionnaire for 2023/24 by emailing tax@cogentaccountants.co.uk

Please return your completed questionnaire together with any attachments by email only to our Tax Department – tax@cogentaccountants.co.uk

You are required to file a tax return if:

• You have been asked to file one by HMRC
• You have a tax liability for the year (e.g. additional and higher rate tax, student loan in repayments, high-income child benefit charge or if you have any income which has not been taxed at source)
• You have a new source of income that needs to be declared.

***PLEASE IGNORE THIS REMINDER IF YOU HAVE ALREADY SENT US YOUR QUESTIONNAIRE**

As HM Revenue & Customs (HMRC) announces record-breaking tax revenues for the 2023/24 fiscal year, it’s evident that despite this financial success, the service levels provided to taxpayers, continue to suffer.

Last year, they collected a staggering £834.4 billion, up from £814 billion the previous year, and yet the tax authority’s performance in customer service is quite different – often to the frustration of those in the contracting sector.

Declining service levels at HMRC

Recent statistics highlight a significant drop in service quality, particularly evident in HMRC’s phone support.

With one in three phone calls going unanswered and average call wait times reaching 23 minutes – up dramatically from just five minutes in 2018/19 – the situation is deteriorating.

This decline is more than an inconvenience. It represents a critical barrier for contractors, and their agents like us, who require timely resolutions for their tax-related queries.

Digital solutions and future outlook

In response to these challenges, HMRC is enhancing its digital offerings, including the introduction of a Digital Assistant and webchat functions.

These initiatives are part of a broader effort to alleviate pressure on traditional communication channels and improve overall service efficiency.

Yet, the effectiveness of these measures in meeting the specific needs of taxpayers remains to be seen.

HMRC’s legal obligations

Under the HMRC Charter, the tax authority has a legal  obligation  to be responsive and efficient in its dealings with taxpayers.

However, the current situation and the acknowledgement of “serious challenges”, including financial pressures and an increasing number of complex taxpayer cases, suggest it is struggling to uphold these commitments.

Cogent Accountants is dedicated to supporting contractors in these complex times. By providing expert guidance and proactive solutions, we aim to mitigate the impacts of HMRC’s service-level challenges on your business. Remember, we are here to help you navigate through the bureaucracy efficiently and effectively.

Just a reminder that if you make payments on account and haven’t yet paid your Second Payment on Account towards your 2023-24 self-assessment tax liability, the payment should be made by 31 July 2024 to avoid any interest being charged on late payment.

If Cogent prepared your last tax return, we would have advised you in our letter with your tax return advising you of the amount to be paid by 31 July 2024.

 Any questions, please email tax@cogentaccountants.co.uk

As you are no doubt aware, the Labour Party has succeeded in ousting the Tories from Parliament with a significant majority.

After 14 years of Conservative Party administration, British businesses are now bracing themselves for a radically different attitude to the economy and social policies.

Much has been said on the matter – both by economists and the commentariat – but what matters to you is the key question: “What’s going to happen to my finances now?”

It’s a tough question to answer, especially as Labour has only been in place for a short while, but we’ve scoured their manifesto and comments to try to piece together a prediction for the future.

Here’s what we’ve found…

Taxes and National Insurance

Labour’s 2024 manifesto promised not to raise National Insurance, VAT, or Income Tax rates.

However, you might still face a higher Income Tax burden due to the Conservative’s freeze on the Personal Allowance and tax thresholds.

Whether Labour make changes to this is yet to be seen but we feel their unlikely to amend the current policy.

Stamp Duty, Capital Gains Tax (CGT), and Inheritance Tax are areas where Labour has provided few assurances either.

While ruling out CGT on primary residences, other adjustments in these taxes are certainly on the cards.

Sir Keir Starmer, our new Prime Minister, has mentioned that the temporary Stamp Duty threshold increase for first-time buyers will revert to £300,000 (from £425,000) in April 2025.

Rachel Reeves has also suggested she might introduce measures to address tax system fairness, such as:

• Ending offshore trusts to avoid Inheritance Tax.
• Removing VAT exemption and business rate relief for private schools, with the revenue used to train more teachers.
• Abolishing non-dom status in favour of a scheme for short-term residents.

Labour may also implement the “UK Individual Savings Account (ISA)” to boost investment in the UK economy.

As you can see, the tax waters are somewhat muddy, but it’s probably a safe bet that your taxes will increase over the next few years – unfortunately.

It’s worth noting that Labour could benefit from a potential interest rate cut by the Bank of England (BoE) as inflation meets the BoE’s two per cent target.

This would reduce borrowing costs for those with tracker or variable-rate mortgages, and fixed-rate holders might find better deals upon renewal.

Labour’s housing targets

The Labour Party has said it aims to build 1.5 million homes over five years to address housing shortages. Plans include:

• Funding more council planning officers.
• Reviewing green belt boundaries to prioritise brownfield and “grey belt” land.
• Allowing local authorities to allocate more green belt land for housing.
• Reintroducing mandatory local housing targets.
• Publishing new design codes for better property quality.

Labour also plans to help young people get on the property ladder by giving them priority in new housing developments and introducing a permanent Freedom to Buy mortgage guarantee scheme to support 80,000 young buyers over five years.

State Pension and pension reforms

Labour has said it will maintain the State Pension triple lock until at least 2030, ensuring annual increases based on inflation, average wage growth, or 2.5 per cent, whichever is highest.

Labour will not reintroduce the pension Lifetime Allowance (LTA), providing certainty for savers and avoiding the complexities of reinstating former rules.

They promise to review the private pension system for better outcomes, with reforms expected after the 2025/26 tax year.

They are also talking about increasing UK investment by allowing workplace pension schemes to consolidate and scale effectively.

Perhaps the most politically divisive comments come from the party’s senior tax adviser who has suggested introducing ‘means tested state pensions.’

In other words, despite having paid into the scheme for your entire working life, if you are deemed over the threshold, you could lose all rights to your state pension.

Luckily, the complexity and sheer unpopularity of the idea has caused many to suggest the idea would never actually be implemented.

Employee rights and minimum wage

For business owners, Labour’s “new deal for working people” includes:

• Banning zero-hours contracts.
• Ending “fire and rehire” practices.
• Introducing parental leave, sick pay, and unfair dismissal rights from day one of employment.

Labour also plans to reform the minimum wage to a “genuine living wage” and remove age bands, potentially raising salary costs for businesses employing younger workers.

It is unclear if this would apply to over-16s or over-18s but either way could increase your employment expenses considerably.

Autumn Budget and fiscal events

Rachel Reeves has indicated that Labour will not deliver a Budget without Office for Budget Responsibility (OBR) forecasts, typically requiring about 10 weeks.

Therefore, the earliest possible Budget date is mid-September, with October or November being more realistic.

Labour has committed to one major fiscal event per year, allowing families and businesses time to plan for tax and spending policies.

We feel this is a positive move as multiple budgets, statements and major events can cause a great deal of uncertainty, especially for businesses.

The response to our latest refer-a-friend giveaway has been incredible… but there could be only one winner and one runner-up.

Before we declare who they are, we just want to say a massive thank you to everyone who participated and took the time to recommend our services to their friends and colleagues.

And here is the moment you have all been waiting for – the winner of the 55″ 4K Smart TV is:

Jenny from London

Jenny was in beautiful Porto for the Primavera festival when she received the call from us about her big win having successfully referred her friend to the Cogent fold – making an already wonderful week away even more special.

An avid live music fan, Jenny can often be found at gigs and festivals, as well as live comedy and theatre events. Having moved to London 15 years ago, she really enjoys live performances as she makes the most of what the capital has to offer.

Whilst not a die-hard football fan, she has been enjoying watching some of the Euro matches on her new 55″ telly with her boyfriend who is a massive Portsmouth FC supporter.

A client of ours for 10 years, Jenny is a Chartered Human Factors specialist, working across sectors, currently fulfilling a Working Environment role for a large Norwegian project.

This time around we also had an honourable runner-up, who is now proudly wearing a crisp England shirt as he cheers on the Three Lions:

Craig from Hampshire

Craig and his family, Harrison 11 and Amelia 7, are enjoying the summer of sports and were really excited to watch England’s opener against Serbia.

A Senior Cost Consultant, Craig is cheering on England in his fresh shirt. A former semi-professional footballer, he now enjoys playing golf in his spare time, with his current goal to get his handicap into single figures this year (currently 11.1). He also really enjoys watching his son play football and his daughter dance (tap, modern, ballet and musical theatre).

Thank you to everyone who participated in our recent giveaway at Cogent. We truly appreciate your support! But remember, it doesn’t end there…

It’s coming home!

Because we’re all about the extra time thrill – if England win the Euros, we’ll kick off another round of celebration with a bonus ‘Penalty Shootout’ prize draw.

Everyone entered into the original draw will then also have a shot at winning £250 in Amazon vouchers.

It’s our way of keeping the party going!

Don’t forget, for every successful referral you make, you’ll earn £100, and so will the person you refer!

Refer a friend to Cogent Accountants today.

As the general election draws near, the issue of IR35 and the broader implications for contractors and the self-employed have emerged as a significant political topic.

Various parties are now presenting their stances, with the potential to sway a critical voter base.

Amidst the tumult of recent years, businesses and independent professionals alike seek stability and beneficial policy reform from the incoming Government.

Both the Conservative and Labour parties have pledged to maintain current personal tax thresholds until 2028, effectively increasing taxes as inflation rises.

However, significant reforms or reductions in tax rates have not been part of their main agendas.

Reform UK and Liberal Democrats Focus on IR35

Noteworthy mentions of IR35 have come from the smaller political factions. The Liberal Democrats, through deputy leader Daisy Cooper, have shown interest in reviewing the off-payroll working rules.

More radically, Reform UK proposes to abolish IR35 altogether, aligning with its broader tax simplification agenda.

Labour’s approach to employment status

Labour aims to simplify employment status distinctions, potentially merging ‘Worker’ and ‘Employee’ statuses into a single category.

This plan intends to clarify legal employment definitions, focusing on providing substantial protections and addressing the ambiguities that currently complicate tax and employment law for freelancers.

The Call for Clearer Policies

The Association of Independent Professionals and the Self-Employed (IPSE) has released a manifesto entitled ‘The Courage Economy,’ urging all political parties to adopt more daring and supportive policies for the self-employed.

This manifesto highlights the necessity for a legal and fiscal environment that better acknowledges and fosters the contributions of freelancers and contractors to the economy.

The Need for Systemic Change

Regardless of which party takes power, there is a clear consensus that the existing IR35 rules are inadequate.

Critics argue that these rules have not only failed to meet their objectives but have also hindered the flexibility of the UK’s workforce.

With the contractor and freelancer vote still up for grabs, the outcome of the election could significantly influence the future landscape of employment and tax law in the UK.

This election represents a pivotal moment for policymakers to align their strategies with the needs of a vital sector that champions innovation and entrepreneurial spirit in the UK.

In the last few newswires, we have looked at how you can set expectations and maintain them, and if there is any value in exceeding them.

Whilst your contract may clearly define your role and responsibilities, as well as the project you are engaged in, could there be value in doing more? Or will it just eat into your profits and affect your work/life balance?

With the growing number of people choosing to freelance, the market in some sectors is becoming more and more competitive.

Merely meeting the expectations of an initial agreement often isn’t enough to distinguish a business from its competitors, especially if you are just starting or returning to the contractor life.

Going above and beyond can play a crucial role in securing future work, earning referrals, and building a stellar reputation.

However, contractors must navigate these extra efforts carefully to ensure they do not adversely affect the profitability and benefits derived from a contract.

Achieving more than what’s expected

Contractors looking to exceed client expectations can consider several strategies that enhance value without significant cost:

1. Proactive communication: Regular updates and clear communication can elevate a client’s experience. This helps in managing expectations and prevents any misunderstandings that might arise regarding project scope or timelines.
2. Quality assurance: Paying closer attention to detail and ensuring high standards in every aspect of the work not only pleases the client but also minimises costly reworks.
3. Innovation: Offering innovative solutions that save time, reduce costs, or enhance the product or service can significantly impress clients and make a contractor stand out.
4. Personalisation: Tailoring services to the specific needs of a client demonstrates a deep understanding of their requirements and can lead to higher satisfaction levels.

Balancing excellence with efficiency

While striving to exceed expectations, contractors mustn’t let these additional efforts erode their profit margins or the overall benefits of the contract.

Here are some tips to maintain this balance:

1. Cost analysis: Before committing to extra measures, conduct a thorough cost-benefit analysis to ensure that the added value exceeds the costs involved.
2. Set clear boundaries: Define what constitutes ‘exceeding expectations’ and set clear boundaries to prevent scope creep, which can lead to unanticipated work without additional pay.
3. Leverage technology: Employ technology to streamline processes, enhance precision, and reduce waste. Automation tools can also help in managing tasks more efficiently, allowing for the extra bandwidth needed to go above and beyond.

Contractors who consistently exceed expectations while managing costs effectively build a reputation for reliability and quality.

This reputation becomes a powerful marketing tool, often more influential than traditional advertising.

Contractors should also encourage satisfied clients to provide testimonials or refer their services to others, leveraging their enhanced service delivery into new business opportunities.

Achieving a delicate balance, when maintained successfully, can secure a contractor’s growth and sustainability in the industry.