How much to set aside for tax?

[Maxnaggle]

Just in the process of setting up allowances for myself and putting a portion of earnings aside weekly for monthly bills so that my cash flow is a bit more predictable - boring stuff - was just wondering how much of your wage you all put aside for the tax man? ive gone in at 20% but have been told thats too much! sweet if it is, just going for other opinions? ta

[Maxnaggle]

forgot to add that im on average of 75£ a day, 5 days a week. about 16k a year i think !

[alex_m]

It's 20% of anything over £9450 (ish) as of this year - £10k next year! Woohoo!

 

Even if you over save (ie 20% of everything you invoice), it's not a bad thing! You'll just have a nice bonus each year.

[Maxnaggle]

oh nice one! the only problem with me setting aside 20 percent of everything is that it doesnt actually leave me that much left over after budgeting for everything else

[WorcsWuss]

oh nice one! the only problem with me setting aside 20 percent of everything is that it doesnt actually leave me that much left over after budgeting for everything else

 

Revenue won't care, they don't care what you spend your bit on so long as it doesn't eat into there bit!

[Wolfie]

oh nice one! the only problem with me setting aside 20 percent of everything is that it doesnt actually leave me that much left over after budgeting for everything else

 

Welcome to self employment.

 

If this is your first year then you may not realise that when you submit your first tax return they will want you to pay tax owed on your first period PLUS 50% up front on your next years tax (based on the same earnings as the first year) - sometimes catches people out.

On the figures you've mentioned, 20% would probably still cover it.

 

 

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[Stephen Blair]

If your self employed, making £16 k a year.

I can't see you having to pay any tax.

You will have expenses to write off.

[Big J]

If your self employed, making £16 k a year.

I can't see you having to pay any tax.

You will have expenses to write off.

 

Agreed.

 

If you are paying tax on that you aren't doing your taxes correctly.

[18 stoner]

As Stevie says, you probably won't need to pay any tax, given your tax free allowance, plus your expenses, you won't show much profit as you will no doubt have set up expenses.

 

A rough guide that I'd go by is, put an extra 25% away on what you pull out for personal drawings and any profit.

 

This will cover your tax bill and go a good way towards paying your accountant.

[Steve Bullman]

oh nice one! the only problem with me setting aside 20 percent of everything is that it doesnt actually leave me that much left over after budgeting for everything else

 

That should be a warning sign in itself. Put your rate up man