Tax deductible costs
Jan 05 2006
You do not mention whether your business is trading as a sole trader, a partnership or a limited company. Nor have you mentioned the profits you are making. As a very rough guide it is advisable to set aside 25% of your turnover to cover your tax and national insurance liability. 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.
It is advisable to transfer the money you are setting aside for tax and national insurance to a separate account. If the money is retained within the business bank account it is easy to use it as working capital and it may not then be available when need to make payments to HM Revenue and Customs.