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How To Budget For Your Tax Payments
There are all kinds of things that stop us from getting a good night’s sleep. For the average employee, the thought of an impending presentation or big meeting can disrupt circadian rhythm. For the self-employed, it’s tax that keeps them up at night.
When you work for yourself and fall behind on your responsibilities to pay the money you owe, HMRC can suddenly morph into a nightmarish villain. But it doesn’t need to be this way. The secret to self-employed sweet dreams is simply being prepared.
Here, we’ve provided some top tips for paying tax from your self-employment coffers, allowing you to hit the pillow with peace of mind.
Create an advance payment plan
Whilst a lot of contractors are intimidated by the powerful presence of HMRC, it’s important to remember that this “beast” can be pacified: you just need to feed it what it demands. If you show that you’re willing to put food on the plate for this tax-hungry entity, you’ll never experience any sort of threat.
You can head across to the UK government site to discover more about how to set up a budget payment plan to HMRC. By contributing regular installments you can remain one step ahead; demonstrating your commitment to paying what you owe. If you pay too much by mistake, you’ll get it back when HMRC have conducted their review. Simple.
Set aside a good chunk of money each month
Another tip for staying on top of your tax payments is by doing it the old-fashioned way: putting aside 20-30% of your monthly earnings in a separate account.
With a sizable fund to draw on when the taxman comes a-calling, you’ll be able to pay off most – if not all – of what you owe from this allocated pot. That means there’ll be no need to go dipping into your savings to appease HMRC, and everything is handled in a simple, stress-free manner.
Open a business account
Every contractor or self-employed individual ought to have a business account that separates personal comings and goings from commercial transactions. Attempting to distinguish between different types of income and expenditure in a single bank account can be a laborious process, adding unnecessary pressure when it comes to compiling your self-assessment.
Not only does having a business account help to improve the accuracy of your tax returns, it also keeps your finances organised in a much more effective way. As a result, you’ll develop a better understanding of the funds you have available for tax, and what you might be able to claim back on expenses.
If you need any further assistance or advice when it comes to budgeting for your tax payments, Bright Ideas Accountancy can help. We specialise in supporting self-employed workers and contractors just like you – keeping accounts ship, shape, and shiny so you can concentrate on the well-being of your business. Get in touch with our helpful team on 0161 951 5306 for more information.