How Much Should I Save for Tax?

When you’re employed, Income Tax and National Insurance come out of your pay before you see it. When you’re self-employed, the full amount your clients pay you lands in your account — including the part that will eventually go to HMRC.

That gap between earning and paying is where problems start. Self Assessment bills arrive in lump sums, usually by 31 January, and can feel enormous if nothing has been set aside during the year. Reserving a little from each payment turns one intimidating bill into a series of manageable transfers.

There is no single correct percentage. What you owe depends on your profit after expenses, whether you also have employment income, and whether you pay Scottish Income Tax rates. Two sole traders with the same turnover can owe very different amounts.

Rather than guessing, the calculator above estimates your Income Tax and Class 4 National Insurance from your own figures, then divides it across twelve months and shows the equivalent share of your profit — so you can see both the monthly amount and the percentage.

20% is a popular rule of thumb because it matches the basic rate of Income Tax, but it ignores Class 4 National Insurance and the higher rates that apply as profits grow. For many people it is not quite enough.

30% is safer but can be more than you need — especially in your first year, or if your profit is largely covered by the Personal Allowance. Using an estimate based on your own numbers means you are neither caught short nor holding back cash you could use in your business.