Income tax and NI - How much to set aside
Nov 21 2005
You do not mention whether the new business will be trading as a sole trader, a partnership or a limited company. Nor have you mentioned the profits you are likely to make. As a very rough guide it is advisable to set aside 25% of your turnover to cover your tax and national insurance liability. This is best done by transferring the money to an account outside the business. If the money is retained within the business it is easy to use it as working capital and it not be available when need to make payments to HM Revenue and Customs. By regularly (monthly or quarterly) preparing management accounts, which tell you how much profit the business is making, you can check whether the sum put aside will be adequate or excessive and you can adjust the amount accordingly