How much should you be saving for your tax?
As you are aware, there is a long delay between the month that money is earned and the month the tax which is directly related to that earned income is paid. This is why saving a proportion of your earnings each month is essential.
But “how much?” is the question that is often asked to the team at Figurit. Whilst everyone’s circumstances are different and regular tax estimates are recommended to obtain an accurate position, we broadly suggest the following:
Should save 20-25% of total income. As tax is based on profits, after deducting typical expenses that a dentist or medical consultant should incur, this should leave enough funds to cover the tax liability and the first payment on account by the time the bill arrives.
Should save about 10% of total turnover income. This should make sufficient funds to cover corporation tax liability, which is broadly 20% of profits.
Many directors will have very little tax liability due to trading through a limited company. However, there will be 25% to pay on dividends taken over broadly £35,000 so keep this in mind.