How To Budget For Your Tax Payments

Google reviews
October 06, 2017
n

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.

businessman character confused with tax and debt cartoon vector

Resources

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