Do You Have Enough Money Set Aside to Pay Your Taxes?

Google reviews
December 04, 2015

Individuals starting out a new business often find themselves asking one question: How much money do I set aside for my business taxes? For those who have spent a few years in developing their business, you have a good feel about how much money you should set aside to pay for expenses and taxes at the same time. Once you are able to make estimated tax payments, you will be in a better position to put away necessary funds to pay for business taxes. But what do you do before that? Here are some tips to consider when setting aside a certain amount of money to pay your business taxes.

How Much to Save From Your Very First Payment

It’s normal for people who run their own business to become overly-excited when they receive their very first payment. The instant impulse that you might have on receiving this payment is to make reckless expenses. However, it is in your best interest to refrain from such activities when you receive your first payment and to save at least 20% of your profit so that you can pay off your business taxes. Many individuals run out of businesses only because they were unable to manage their finances productively.

Why is Setting Aside Too Much Never Enough?

No business incurs profits the moment it is set up. There are several ups and downs that a business will experience on its way to success, which is why you should start setting aside a certain amount from the very beginning so that you are in the practice of doing so for the many years to come. Limited Companies  currently pay corporation tax at 20% of profits. What you have to take account of is the fact that there may be personal tax and also VAT payable.

Does Experiencing a Loss in the First Year Mean I Can Spend My Tax Money That I Set Aside?

Absolutely not! You will have to add that saved amount to the next year so that you will be able to pay taxes then. If all this sounds too technical and difficult, then it is always best to seek professional assistance regarding how much money you should exactly set aside to pay your taxes. In order to avoid any legal action from IRS and prevent yourself from running out of business, it is always best to ask a lawyer or accountant who is aware of such issues. Too often, people that own small businesses experience tax trouble due to reckless expenditure. As they try to scrape their way to success, they are slapped back with a tax bill. Success is sweet, but there is a hefty price for it.

How can you ensure you have set enough aside?

Working with a great accountant along with modern bookkeeping software really helps! So long as you are up to date with your bookkeeping, your accountant will be able to advise on what money the company needs to keep aside for taxes. Also what money you personally have to keep aside for personal tax.



Recent Articles

650,000 extra pensioners pay tax for the first time this month

650,000 extra pensioners pay tax for the first time this month

Around 650,000 pensioners are facing the prospect of paying tax on their pensions for the first time from this month thanks to a big boost to the State Pension from April 6, and frozen tax bands that will drag them into the tax net, according to calculations from...

The end of the P11D is expected in 2026

The end of the P11D is expected in 2026

The P11D form which has been used to process ‘benefits-in-kind’ such as loans for season tickets and company cars will no longer be used after April 2026, as HMRC will ask businesses to deal with all these benefits through the payroll instead. HMRC announced earlier...

Cryptocurrency gains must be reported on self-assessments

Cryptocurrency gains must be reported on self-assessments

If you hold or invest in cryptocurrency, or even if your employer pays you in a cryptocurrency such as Bitcoin, you may need to declare this on your self-assessment form. For anyone who didn’t in the 2022/23 form which should have been filed before January 31, it...

Ready to join us?

Whether you’re a contractor, freelancer, or small business, Bright Ideas can help remove the burden of time-consuming and complex finances. We’ll draw on our years of knowledge and experience earned helping sole traders just like you.

When you choose us, you’ll be assigned a dedicated Account Manager who’ll provide one-on-one support that’s customised to your business. Communication is key, so we’ll always answer your questions or requests as soon as we can. In fact, we offer a same-day response guarantee for emails and calls received before 3pm.

Contact us to get started

Give us a call us or send an email today!

Looking to switch accountants?
We make the transition simple.

Does your current accountant give 1-to-1 support? Are they fast and thorough?
Slap-dash services hold businesses back, so try our experts instead.

Move to an accountancy service that goes the extra mile…

Start the conversation

Let’s make your finances Brighter

Call us Monday to Friday 9am - 5pm

0161 669 4221

Request a call back