{"id":45595,"date":"2026-01-21T15:30:35","date_gmt":"2026-01-21T15:30:35","guid":{"rendered":"https:\/\/www.simplybusiness.co.uk\/?post_type=knowledge&p=45595"},"modified":"2026-01-21T15:30:37","modified_gmt":"2026-01-21T15:30:37","slug":"how-much-should-i-save-for-taxes","status":"publish","type":"knowledge","link":"https:\/\/www.simplybusiness.co.uk\/knowledge\/business-tax\/how-much-should-i-save-for-taxes\/","title":{"rendered":"How much should I save for taxes? An accountant’s guide for business owners"},"content":{"rendered":"\n

Sometimes tax bills can bring nasty surprises \u2013 especially if you\u2019re newly self-employed and aren\u2019t sure how much you\u2019ll have to pay. In this blog, Cameron S<\/em>nelgrove from accountancy firm CSnel Ltd, shares his best tips for budgeting for tax when you run your own business. <\/em><\/p>\n\n\n\n

It\u2019s a practical reminder of what to think about throughout the year to make sure you\u2019ve saved along the way \u2013 and how to avoid a big bill you\u2019re not expecting at the end of January. <\/em><\/p>\n\n\n\n

Tip 1: Save with every payment <\/h2>\n\n\n\n

A simple way to manage tax as a first-time filer is to treat it like a regular outgoing rather than a one-off bill. <\/p>\n\n\n\n

It may sound obvious, but without being taxed \u201cat source\u201d (as you would if you worked for an employer), you need to be managing that regular tax responsibility yourself. <\/p>\n\n\n\n

Setting up a separate savings account specifically for tax and transferring a percentage of every payment you receive into it can make a big difference. <\/p>\n\n\n\n

Many self-employed people choose to set aside around 20\u201330 per cent of their monthly income, depending on their circumstances. This means money is gradually built up across the year rather than needing to be found in January.<\/p>\n\n\n\n

\n

Action: <\/strong>Save 20-30 per cent of your income each month and set it aside in a separate savings account or \u201csavings pot\u201d within your business bank account<\/a>.\u00a0<\/p>\n<\/div>\n\n\n\n

Tip 2: Plan for quieter months<\/h2>\n\n\n\n

I always recommend that clients think about what would happen if their income gets interrupted for any reason. While it\u2019s never a nice thought, planning for quieter months helps reduce any financial stress you might have as a freelancer. <\/p>\n\n\n\n

Try to have an \u201cemergency fund\u201d that can support you if anything unexpected happens and you\u2019re unable to work. And income protection insurance is also worth considering, as it can help cover essential costs if you\u2019re unable to work due to illness or injury. <\/p>\n\n\n\n

\n

Action: <\/strong>Consider having an emergency fund that you can rely on if times get tight.\u00a0<\/p>\n<\/div>\n\n\n\n

Tip 3: Estimate your tax bill<\/h2>\n\n\n\n

The government has a tax tool<\/a> to help you work out how much income tax and Class 4 National Insurance you\u2019re likely to pay. You just need to have an idea of your profit for one week or one month and the calculator will estimate the full year.\u00a0<\/p>\n\n\n\n

Obviously this won\u2019t allow for fluctuations in income so can only be used as a rough guide, but it might help you understand the percentage of income to set aside. <\/p>\n\n\n\n

Many first-time filers overpay tax by not claiming expenses they\u2019re entitled to, such as office costs, software subscriptions, mileage, business insurance, or a portion of home-working costs. As Director of Csnel Ltd<\/a>, I\u2019m often advising clients on how this part of business tax works.\u00a0<\/p>\n\n\n\n

\n

Action: <\/strong>You can reduce your taxable income with self-employed expenses<\/a>, by deducting these costs from your annual turnover.\u00a0<\/p>\n<\/div>\n\n\n\n

\n<\/div>\n\n\n\n

Tip 4: Remember payment on account<\/h2>\n\n\n\n

Newly self-employed people can often get caught out by payment on account, and this is something I see often in my accountancy practice. This is effectively where you pay an estimate for a portion of your tax bill for the year ahead as well as any tax owed on the previous tax year.\u00a0<\/p>\n\n\n\n

Every January you\u2019ll pay a balancing payment for the tax year you\u2019re filing for, plus an advance payment towards the next tax year\u2019s bill. The advance payment is for the six months from January to June. You\u2019ll then make another advance payment in July. <\/p>\n\n\n\n

\n

Action: <\/strong>Check you understand how payment on account<\/a> works if you\u2019ve not filed before.\u00a0You’ll be paying the previous year’s tax plus 50 per cent of the next year’s bill too. <\/p>\n<\/div>\n\n\n\n

Tip 5: Think about your pension pot<\/h2>\n\n\n\n

It\u2019s a well-known fact that running a business or being self-employed comes without the safety net you often get as an employee. And one of those is a pension scheme that lets you pay money in before it reaches your bank account.\u00a0<\/p>\n\n\n\n

But it\u2019s worth budgeting for a self-employed pension scheme if you can. Since you won\u2019t have an employer paying into one for you, you should consider putting in a higher percentage of your income to save for retirement.\u00a0<\/p>\n\n\n\n

How much you save into a pension is up to you, and depends on your age and circumstances. But a good rule of thumb is to save about 10 per cent of your monthly income into a pot. <\/p>\n\n\n\n

\n

Action: <\/strong>Look into self-employed pension schemes<\/a> and consider paying in about 10 per cent of your monthly income<\/strong>. You can choose ordinary personal pension (offered by most large providers), stakeholder pension, or a self-invested personal pension (SIPP).\u00a0<\/p>\n<\/div>\n\n\n\n

This content is for general, informational purposes only and is not intended to provide legal, tax, accounting, or financial advice. The views and opinions expressed are those of the guest author and don’t necessarily reflect the views of Simply Business. Always get professional advice if you\u2019re not sure about anything.\u00a0<\/em><\/p>\n\n\n\n

Helpful finance guides for the self-employed<\/h3>\n\n\n\n