How much tax to set aside when you are self-employed

The rule: set aside on the way in

Every time a payment lands, move a fixed percentage to a separate tax account immediately. Do not wait until the return. Money that never enters your spending account is never missed.

Choosing your percentage

Start at 25-30% of every payment if you have no other income, and revise once you know your actual profit and rates. Higher earners and those with student loan or self-employment contributions should sit nearer 35-40%. Confirm your exact rates with your tax authority or accountant.

Set aside on profit, not turnover

You are taxed on profit. If you have significant costs — materials, fuel, tools, subcontractors — record them properly and your set-aside percentage of turnover can be lower. Poor expense records are the most expensive habit in self-employment.

What else to hold back

• Sales tax / VAT if registered — this is never your money - Pension contributions - Quiet-month buffer — at least one month of business and personal essentials - Equipment replacement

Keep three pots

Business current account, tax account, buffer account. Simple, and it makes your true available money obvious at a glance.

Diary the deadlines

Payment dates, not just filing dates. A calendar reminder a month before each due date gives you time to fix a shortfall.

Make it automatic

MoneyQuilt tracks income by client, splits a tax percentage off every payment into a bucket, and shows what is actually yours to spend.