Most self-employed people don’t get tax wrong because they’re careless. They get it wrong because nobody explained it simply. The question I hear most is “how much should I put aside?” Here’s the answer with real 2026/27 numbers.
Your bank balance isn’t your profit
Jordan, a personal trainer, had £29,000 in the bank and felt comfortable. But his tax was worked out on his profit, not his balance:
| Jordan’s 2026/27 (cash basis) | Amount |
|---|---|
| Money in from sales (turnover) | £52,000 |
| Costs paid | −£13,000 |
| Profit: what tax is worked out on | £39,000 |
| Drawings: money he took out for himself | −£10,000 |
| Left in the bank | £29,000 |
His drawings didn’t reduce his profit, so about £6,872 of that £29,000 already belonged to HMRC as Income Tax and National Insurance. It’s due whether or not the money is still in the bank.
Key point: tax is worked out on profit, not on turnover or what’s in the bank. Set tax aside before you spend.
A dated plan: £703 a month
Dan is a sole trader expecting £45,000 profit in 2026/27, in England, with no other income. His estimated bill is £8,431.80: £6,486 Income Tax plus £1,946 Class 4 National Insurance.
One-twelfth of that is £702.65, rounded up to £703 a month. Here’s what happens if he starts saving in April 2026:
| Date | What happens | Paid in | Paid to HMRC | Pot after |
|---|---|---|---|---|
| Apr 2026 – Jan 2028 | 22 monthly deposits of £703 | £15,466 | – | £15,466.00 |
| 31 Jan 2028 | 2026/27 bill £8,431.80 + first 2027/28 payment on account £4,215.90 | – | £12,647.70 | £2,818.30 |
| Feb – Jul 2028 | 6 monthly deposits of £703 | £4,218 | – | £7,036.30 |
| 31 Jul 2028 | Second 2027/28 payment on account | – | £4,215.90 | £2,820.40 |
Saving from the start of the tax year covers the first January, including the payment on account. If you start saving later, you’ll need more each month.
Assumes the same £45,000 profit each year, no other income, England, and no claim to reduce payments on account. This is a budgeting method, not a universal percentage.
Work out your own amount. Enter your bill and start month, and get a dated plan like Dan’s.
Build my tax potWhy not just save 20%?
Because the right amount depends on your profit, where you live and your first-year payments on account. At £45,000 profit, Dan’s tax and NI is about 18.7% of his profit, but his first January payment is £12,647.70, half as much again as his bill. A flat percentage can leave you short at exactly the wrong moment.
If you live in Scotland, have a job as well, repay a student loan or pay into a pension, your numbers will be different. The tax estimate handles Scottish rates.
Make it automatic
- Open a separate savings account for tax. Move tax money out of sight.
- Set aside every time you’re paid, before you spend.
- If you’re VAT-registered, move the VAT part of every sale into its own pot the day you’re paid.
- Review your forecast quarterly and update your monthly amount if profit changes.
Strength comes from small, regular sets. So does a tax bill you’re ready for.
The full picture, free. 48 pages for sole traders and company directors, with every example worked through.
Get the UK Tax GuideFigures from The UK Tax Guide 2026/27 (chapters 1 and 8), checked against GOV.UK on 21 October 2026. Sources: Income Tax rates · Self-employed National Insurance rates · Payments on account. Educational information, not tax advice. Check GOV.UK or speak to a qualified adviser before acting.