Hints, Tips and Guides

...to grow a business that works for you

How much should I save for tax?

Most of you would have heard us bang on about this before but it is something that is well worth reminding everyone and maybe it is new to you.

Save your tax throughout the year!!!

And not just save it in your current account, ideally set up a separate account (or pot if you are with a snazzy online bank) and get it out of your current account and away from temptation

This is important for a number of reasons.

Firstly, if you are saving your tax as the money is coming in you won’t be left facing a horrible payment to HMRC that you haven’t got the money for anymore.

Secondly, if you are a limited company, by saving your tax money and not withdrawing it from the business you are much much less likely to end up with an overdrawn directors loan account. This is where you will end up owing your limited company money as you have taken out too much. HMRC really do not like people doing that so there are some nasty tax impacts if you end up in that situation.

When it comes to VAT the money that you collect on your sales is never really yours so if you move this to a different account then you are much less likely to get into a mindset of the money being yours to spend.
How much to save?

We suggest that you save 20% of your income for your tax bill. This should cover all of your tax that will be due each year.

If this ends up meaning you have saved too much as your expenses were high, then great you get to pay yourself a year end bonus for all your hard work.

It may feel like a lot to save and no fun at all, but just think of the warm fuzzy feeling you will get when it is time to pay HMRC and you have the money sat in a bank waiting and you do not need to stress about how you will pay them.

For VAT savings I find it easiest to log into my accounting software and have a quick check on my VAT return each month to see what is due to date. This only works if you keep your bookkeeping up to date each month but it does save a lot of trying to work out what could be due.
As ever if you need any help or advice on tax and accounts reach out to us and we are always happy to help! 

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