How Much Tax Should I Save as a Tradesperson?

Treat tax money as never yours to spend. Four habits:

1. Record your income and costs as you go.
2. Check your profit every month, and work out roughly what tax it means.
3. Move that money into a separate account straight away.
4. Check your HMRC online account before each deadline.

• Self Assessment: the yearly tax return a sole trader sends HMRC.
• Income Tax: tax on your profit, above your tax free allowance.
• National Insurance: a separate tax on your profit that builds up your State Pension.
• Payments on account: payments in advance towards next year's bill, due 31 January and 31 July.
• Budget payment plan: HMRC's way of letting you pay weekly or monthly towards your next bill by Direct Debit.
• Making Tax Digital: keeping records in software that works with HMRC, and sending updates every 3 months.

Work it out, don't guess a percentage. How much depends on your profit, whether you're a sole trader or company, other income, National Insurance, VAT, payments on account and your own situation. Ask an accountant for a figure if it's a big amount.

• Never spend VAT you've collected; it isn't yours
• Don't assume your first bill only covers one year
• Don't reduce payments on account without good reason
• Don't leave your records until January

Most people in Self Assessment pay towards next year's bill in advance: two payments, each usually half of last year's tax, due on 31 January and 31 July. So your first January bill can be last year's tax plus the first half of next year's.

You don't have to pay on account if last year's bill was under £1,000, or if more than 80% of your tax was already taken through your wages. You can ask to reduce payments if your profit is genuinely falling, but if you reduce them too much, you'll pay interest on the difference.

Yes. A budget payment plan lets you pay weekly or monthly by Direct Debit towards your next Self Assessment bill. You choose how much. You must be up to date with your last bill to set one up, and if it doesn't cover the whole bill, you pay the difference.

Making Tax Digital for Income Tax started on 6 April 2026 for sole traders with qualifying income (self employment and property, before costs) over £50,000. It drops to over £30,000 from April 2027 and over £20,000 from April 2028.

If it applies to you, you keep your records in software that works with HMRC and send an update every 3 months, by 7 August, 7 November, 7 February and 7 May. The upside for planning: you see your figures, and a tax estimate, through the year instead of all at once in January.

1. Match income and costs to the bank.
2. Update your expected profit for the year.
3. Check your VAT turnover, if you're near £90,000.
4. Move money into your tax account.
5. Check the HMRC dates coming up, and put them in your calendar.
6. Ask about anything you're unsure of, before a deadline, not after.

Recheck after a really busy or quiet month. The money in your account isn't all yours to spend: some of it's VAT, tax and suppliers.

Act early. Check your online account, contact HMRC, and get qualified advice. You may be able to set up a payment plan to pay in instalments, if HMRC agrees it's affordable. Don't assume it will be agreed, and never ignore letters.