How much should I save for tax?

Being in charge of your own taxes doesn’t have to be stressful if you know what you need to save.

How much is corporation tax?

If you run a limited company, you will need to set aside money for tax. As of April 2023, your tax rate depends on how much you earn in profits. For £50,000 or less, you’ll pay 15%, whereas you’ll pay 25% for profits of £250,000 or more. If you sit in between these thresholds, a tapered rate may apply. Consult your accountant for more information or to obtain an estimate of your tax obligations. If you don’t have one, you’ll need to chat to business accountants Birmingham, such as www.hazlewoods.co.uk/expertise/business-accountants/birmingham/.

Set between 15% and 25% aside on an ongoing basis, based on what you are expecting to earn.

How much is tax for a sole trader or self-employed person?

Self-employment tax is made up of multiple bands, but you’ll only pay tax on what you earn above the personal allowance – currently £12,570. You can use online tools and websites to calculate your projected tax bill but, as a rule of thumb, try to save a third of what you earn.

Most self-employed people have bills due in January, and if your bill exceeds £1,000 then you may have to pay on account. This means you will pay 50% of your estimated tax for the following year up front in January, and then the remaining 50% in July. Should you fall under the threshold the following year, you could get a refund.