How to Budget for Your VAT and Tax Bill: Monthly Savings Guide

How to Budget for Your VAT and Tax Bill: Monthly Savings Guide
Charlotte Baroukh

Charlotte Baroukh

Tax Expert @ Pie

2 min read

Updated: 22 Oct 2024

2 min read

Updated: 22 Oct 2024

Understanding VAT and Tax Budgeting

Are you a business owner in the UK, puzzled about how to budget for your VAT and tax bill? Worry not! We've got you covered with a comprehensive guide on setting aside the right amount of money every month to stay on top of your financial obligations.

Components of VAT and Tax Budgeting

When you run a business, it's crucial to understand the various components that affect your VAT and tax bill:

VAT (Value Added Tax)




VAT is a consumption tax placed on a product whenever value is added at each stage of the supply chain, from production to the point of sale. It's essential to calculate your VAT accurately to avoid penalties.

Income Tax





Income tax is the tax you pay on your business's earnings. Accurate calculations and timely payments are vital to prevent interest and fines.

Corporation Tax




This is the tax on your company’s profits. Being aware of the corporation tax rate and your taxable profits helps in setting aside the right amount of money.

How to Set Aside Money for VAT and Tax Bills

Follow these steps to budget effectively for your VAT and tax bills:

Options for Tax Budgeting Methods

Option 1: Manual Budgeting

This process involves manually calculating your estimated tax liabilities and setting aside the necessary funds on a regular basis. While it’s a simple approach, it demands careful attention, discipline, and consistent monitoring to ensure you’re setting aside the right amount. By staying proactive, you can avoid underpayment and any unexpected financial shortfalls when tax payments are due.

Option 2: Automated Budgeting

Utilising automated financial software allows you to efficiently track your income and expenses while automatically setting aside the necessary amounts for tax and VAT payments. This not only saves time but also improves accuracy by reducing the risk of human error. By automating these processes, you can manage your finances with greater ease and ensure compliance with tax obligations.

Additional Considerations

<h5>Stay Informed on Tax Changes</h5><p><br></p><p>Tax laws and rates can change. Keep yourself updated to ensure you set aside the correct amount.</p>

Stay Informed on Tax Changes


Tax laws and rates can change. Keep yourself updated to ensure you set aside the correct amount.

<h5>Hire a Professional Accountant</h5><p><br></p><p>A professional accountant offers expert advice, helping you manage tax obligations more efficiently.</p>

Hire a Professional Accountant


A professional accountant offers expert advice, helping you manage tax obligations more efficiently.

<h5>Expert Advice for Efficient Tax Management</h5><p><br></p><p>An accountant can help optimise your tax strategy, ensuring compliance and minimising errors.</p>

Expert Advice for Efficient Tax Management


An accountant can help optimise your tax strategy, ensuring compliance and minimising errors.

Expert Assistance with PIE Tax

Navigating the complex process of budgeting for your VAT and tax bill can be overwhelming, but with Pie.tax, you have access to expert tools and services that can guide you through the process. Sign up today to make tax management easier and more effective.

[Get Started with PIE Tax Today!]

<h3><br></h3><h5><strong>72% of small businesses in the UK face difficulties in setting aside money for tax liabilities.</strong></h5>
<h3><br></h3><h5><strong>72% of small businesses in the UK face difficulties in setting aside money for tax liabilities.</strong></h5>


72% of small businesses in the UK face difficulties in setting aside money for tax liabilities.

<h5><strong>On average, UK businesses need to set aside 20% of their revenue to cover VAT and tax obligations.</strong></h5>
<h5><strong>On average, UK businesses need to set aside 20% of their revenue to cover VAT and tax obligations.</strong></h5>

On average, UK businesses need to set aside 20% of their revenue to cover VAT and tax obligations.

Frequently Asked Questions

How do I calculate my VAT liability?

Calculate your VAT liability by summing up the VAT charged on your sales and subtracting the VAT paid on your purchases.

What percentage of my revenue should I set aside for taxes?

It's advisable to set aside about 20-30% of your revenue to cover VAT and tax obligations.

Can I change my monthly set aside amount?

Yes, you should regularly review and adjust your monthly savings based on your actual income and expenses.

What happens if I don't set aside enough money for my tax bill?

You may face penalties and interest on unpaid taxes, which can affect your financial stability.

Is there a tool to help with tax budgeting?

Yes, Pie.tax offers comprehensive tools to help you manage and budget for your tax obligations efficiently.

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