How much should you set aside for tax when you're self-employed?

The money in your account is not all yours

When a client pays you, part of that payment belongs to the tax office. You just get to hold it until the bill is due. The trouble is that a bank balance does not come with a label, so the tax share quietly becomes "money I have" and then, in January, "money I need to find."

The fix is simple in principle: every time you are paid, move a slice into a separate pot and leave it there. The only real question is how big the slice should be.

There is no single correct percentage

What you actually owe depends on your total income for the year, your allowances, your expenses, whether you pay into a pension, and rules that change. Nobody can hand you the right number from a single payment. Anyone who tells you "set aside exactly X%" is guessing at your circumstances.

So instead of chasing a precise figure you cannot know yet, pick a sensible holding percentage and reconcile it against a proper estimate as the year goes on.

Getting a holding percentage

The right percentage for you depends on your total income, your allowances, your expenses, your National Insurance position and whether you pay into a pension. Work it out with an accountant, or from the current guidance and rates your own tax authority publishes, and use that figure as your holding percentage.

Then treat it as a buffer, not a final answer. It is meant to be roughly right and comfortably safe, so that when you do the real sums you are topping up a healthy pot rather than scrambling.

Check it against a real estimate

Once or twice a year, work out a proper estimate of the bill, either yourself or with an accountant, and compare it to what is actually in the pot. If the pot is ahead, ease off slightly or leave the surplus as breathing room. If it is behind, lift the percentage on the rest of the year's income until it catches up.

This is a planning habit, not tax advice. It does not replace working out what you actually owe, and it does not file anything. Check your position with an accountant or your tax authority.

Doing it without the mental arithmetic

The free Tax Set-Aside Calculator takes a few recent payments and the percentages you choose, and shows how much to move into the pot and whether it is keeping pace with your own estimate. No sign-up, and nothing leaves your browser.

The Tax Set-Aside Tracker does the same job across the whole year: one row per payment, a running pot ledger with money in and out, and a running comparison to your estimate so you always know where you stand. It is included, with every other SteadyKeel tool, in the SteadyKeel Pass.