How much do I need to save for tax?

A blog by Ashley MacDonald

I could not tell you how many times I’ve been asked this by clients new and old and let’s be honest it’s a guess.

An estimated guess at that and for some a very accurate one but it is also a very important consideration for our clients.

In these uncertain times it is even more important to make sure clients are thinking about their budgets and future planning. Safeguarding your business has been one of the biggest struggles for many businesses in the past year, and something I have previously touched on but there is an age old saying ‘in this world nothing can be said to be certain, except death and taxes’.

How much do I need to save for tax?

So how much tax should a business save?

Well, it really depends on the type of business. For established businesses I always recommend reviewing past taxes to turnover ratios and then figuring out if there is a trend.

Different industries will find they have different tax to turnover ratios, for example a retail business will likely be very different to a service. A service industry will tend to make a higher profit % as its turnover grows as its fixed costs are the main deduction.

Further thought should go into plans of capital expenditure as well but it’s always a good start to look at past trends.

A growing business is likely to have very different spending patterns to that of a stable and settled business and this could equally affect the tax rates.

In the end I say the same thing to all my clients – save as much as you can afford to save. Do not spend money for the sake of spending it, it’s better to be in a position of having savings above your tax then be scraping around chasing your taxes.

Be organised, be sensible and oversee your finances.

If you’re wondering if you should be saving for your taxes or want advice, get in touch and see if there’s anything we can do to help plan you future. You can call us now or get in touch via the Contact Us page.