How Much Money Should I Put Away for Tax Self-Employed

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If you are self-employed in the UK, one of the biggest questions you may have is: how much money should I put away for tax self-employed? Unlike employees, tax is not taken from your wages automatically. You are responsible for saving enough to pay your tax bill each year.

Why saving for tax is important

When you are self-employed, you need to pay:

• Income Tax – based on your profits.
• National Insurance – usually Class 2 and Class 4 contributions.

If you don’t set money aside, you could struggle to pay your tax bill when it’s due.

How much should you save?

A simple rule is to save between 20% and 30% of your income for tax. The exact amount depends on how much you earn:

• If you earn under the basic rate tax band, 20% is usually enough.
• If your profits are higher, you may need to save closer to 30% to cover tax and National Insurance.

Example

If you make £2,000 profit in a month, saving £400 to £600 is a safe guide. Put it into a separate savings account so you don’t accidentally spend it.

Don’t forget payments on account

If your tax bill is over £1,000, HMRC may ask you to make advance payments for the next tax year. This is called payments on account. Saving regularly helps you stay prepared for this.

Final tip

The best answer to “how much money should I put away for tax self-employed” is: save at least 20%–30% of your profits. Keep the money separate, stay organised, and you won’t have any nasty surprises when the tax deadline comes.