This week, all Covid testing requirements for entering the UK have been scrapped for those who are fully vaccinated.

And for those who are not fully vaccinated yet, the rules have been relaxed too.

You may well be thinking about a holiday abroad now that it’s much cheaper and easier to do so, which makes this post on holiday planning rather timely.

When you’re an employee, you’re automatically entitled to a minimum of 28 days holiday a year, although some employers include Bank Holidays as part of this allowance.

But when you’re self employed, you have to do quite a bit of forward planning and budgeting.

With that in mind, here are a few ideas on how to do it effectively – plus some spreadsheets to help make the number crunching easier.

Are you actually self employed?

Let’s start with a very important question: are you actually self employed?

You may think of yourself as such but, depending on how your working relationship with your client is structured, you may legally be classed as an employee.

That means you should be entitled to holiday pay prorated for the number of days you’ve worked.

The government has an online tool that you can use to determine whether or not the work you do for a particular client counts as self employment. 

A word of warning: sometimes the results are undetermined, which means it could fall either way. 

If that’s the case and you think you’re entitled to holiday pay then it might be worth speaking to your client about this. Depending on the outcome, you may then need to consult a lawyer about your legal position.

How do you plan holidays when you’re self employed?

I posed this question in a Slack channel for freelance journalists and the responses were broadly split between either taking time off during down time or making a concerted effort to block out holiday time throughout the year.

How you structure your holiday can depend on what it is you do and how you do it.

If you tend to work on one-off projects where you’re working full time for a few weeks or few months at a time, it’s often easier to take time off between projects.

It’s also more straightforward as you can just arrange new projects around your holiday days.

But if you work for a few different clients, have projects that lasts for several months, or have a trade that’s continuous – for example, if you sell stuff online – then it would make more sense to plan your holidays in advance.

This way, you can give your clients plenty of notice and plan your workload around your time off.

How to budget for holidays

As a self employed worker, you don’t get paid if you don’t work, so you need to ensure that your income from the rest of the year will cover any time off, including sick pay.

One way to do this is to set a target salary for yourself.

This is hardest in the first year, when you might not know how much money you have coming in. 

But once you get into a routine, it’s much easier to gauge how much you can expect to earn, what your expenses are, and when you might have down time.

Until that happens though, an easy target to set is your minimum required salary – this is the amount you need to live plus any taxes. Here’s an easy calculator you can use to work this out.

Next, work out the number of days you plan to work in a year and subtract the number of days off you want, including any Bank Holidays.

So if you plan to work five days a week for all 52 weeks of the year, that’s 260 days. And if you want to take off 30 days plus the eight Bank Holiday days – 38 days in total – you’re left with 222 working days.

Remember, there’s an extra Bank Holiday in 2022 because of the Queen’s Platinum Jubilee.

Now divide your target salary by the number of working days and you’ll get the day rate you need to hit to pay for the number of days you want to take off. 

So for example, if you want to make £50,000 before tax, work five days a week and take 30 days off plus the eight Bank Holidays, you’ll need to make at least £225.23 a day.

This is the day rate you should be quoting to clients if your business operates on a day-rate basis.

But if you work on a project basis, where the fee is set regardless of how long you work on it, you’ll need to make sure the fee divided by the number of days you spend on it is higher than your day rate.

Working out how much holiday you’ve accrued

If your day rate varies, which is more likely if you’re freelance, you’ll need a different way to work out how much holiday you’ve accrued.

I’ve created a holiday tracker that you can use to work out how many days holiday you’ve accrued at any one time.

You might want to use it alongside the financial goal tracker I shared in the post about financial goal setting.

How I plan my time off

After five years as a full time employee, with freelancing as a side hustle, I’m still working out my routine.

But because of the different types of work I do, last year, I ended up doing a mixture of taking time off during down time and planning ahead. I even took time off from one gig so I could temporarily focus on another.

For some of my work, I consider myself a permalancer – I’m legally classed as an employee but I have a choice of which days I work. I get holiday pay based on how much I work, but if I haven’t accrued enough days, I can still take time off unpaid.

For other work, I’ll fully freelance so any time off will be out of my own pocket.

But for ease of budgeting, I consider any and all time off as coming out of my pocket – any holiday pay I do receive is just a bonus.

My work can be pretty chaotic, and sometimes involve working weekends and evenings to meet deadlines, so I’m pretty generous with myself: I allow up to 30 days off a year, plus Bank Holidays.
Although admittedly because I’ve set myself some pretty high targets as part of my financial goals, I haven’t taken off nearly as many days as I should have.