How much tax should I put aside?
A share of every payment, the day it comes in.
- For
- Put tax money away as it arrives, so the tax bill is never a shock.
- When
- Every time a customer pays
Try it
A 1,000 payment, 30% of it costs, 25% tax on the rest: put 175 aside.
Put aside = payment × (1 − share that’s costs) × your tax rate.
Move it the day you’re paid, before you spend it.
Worked out
| Costs | At 15% | At 25% | At 35% |
|---|---|---|---|
| 10% | 135 | 225 | 315 |
| 30% | 105 | 175 | 245 |
| 50% | 75 | 125 | 175 |
| 70% | 45 | 75 | 105 |
Easy to get wrong
- Spending it, then hoping.
- A friend’s rate instead of your own.
- Keeping it where you spend from.
- Forgetting the sales tax you owe too.
The tool for it
Questions
What rate do I use?
Your own, from last year’s bill or an accountant. Type it in.
Where do I keep it?
In a separate account you don’t spend from.
Does sales tax go in the same pot?
Keep it apart: it was never yours, and it’s often due sooner.
What if I put too much aside?
Then the tax bill is easy, and the rest is yours.
What counts as costs?
What you spent to do the work: parts, fuel, tools, rent.
How often is tax paid?
It depends on the place and your size. Check the rule where you work.
What if I’m already behind?
Start today with every payment, and ask about paying the rest over time.
Should I do this while I’m small?
Yes: small is the easiest time to start the habit.