One of the most common questions we hear from new business owners is:
"How much tax should I be putting aside?"
The honest answer is... it depends.
Your tax bill will vary depending on your income, expenses and business structure. However, there are some simple rules that can help you avoid an unexpected bill at the end of the tax year.
If you're self-employed
A good rule of thumb is to set aside 20–30% of your profits into a separate savings account.
By moving this money as soon as you're paid, you're far less likely to be caught out when your tax bill arrives.
Remember, it's your profit that is taxed – not your total sales.
If you run a limited company
Limited companies have different tax responsibilities, including Corporation Tax, and you may also pay yourself a salary and dividends.
Again, it's sensible to put money aside regularly rather than waiting until your tax bill is due.
Don't forget VAT
If your business is VAT registered, remember that the VAT you collect isn't your money to spend.
Many businesses keep their VAT in a separate account so it's ready when payment is due.
The easiest way to stay on track
The best habit you can build is to transfer money into a dedicated tax savings account every time you're paid.
It only takes a few minutes but can save a lot of stress later.
Every business is different
There's no one-size-fits-all answer when it comes to tax. The amount you should set aside depends on your individual circumstances, so getting the right advice can make all the difference.
At Soldi Partners Accounting, we'll help you understand what to expect throughout the year, so there are no nasty surprises when your tax bill is due.
Share this post: