There is no percentage that works for every sole trader. The amount depends on profit, other income, tax bands, National Insurance, student loans, reliefs and payments on account. A better method is to estimate the bill from your own figures, then turn that estimate into a monthly amount or a share of each payment received.

Start with profit, not turnover

Income Tax and Class 4 National Insurance are based on taxable profit. In simple terms, that is business income minus allowable business expenses. Your accounting method determines when income and costs count. Cash basis generally follows money received and paid; traditional accounting generally follows amounts earned and incurred. Do not mix the two when estimating a year's profit.

Two tradespeople with the same turnover can have different tax bills because their costs and wider circumstances differ. That is why a blanket rule such as "save 20%" can leave one person short and another holding far more than necessary.

Read HMRC's guidance on allowable business expenses before estimating profit.

Build a current-year estimate

Use the figures available now:

1. Total business income for the tax year to date.

2. Allowable costs for the same period.

3. A realistic forecast for the rest of the tax year.

4. Other taxable income, where relevant.

5. Income Tax, Class 4 National Insurance and any student loan repayment likely to apply.

6. Payments on account and CIS deductions already credited, plus cash you have already reserved.

The self-employed tax calculator can provide a rough starting point for the circumstances it supports. Scottish Income Tax and other personal circumstances may require a different calculation. Read its assumptions and use an accountant or HMRC calculation for a decision that needs an exact figure.

Turn the estimate into a saving habit

Illustrative saving example: a fictional business estimates a £7,200 bill, has a full year to save and has no money already reserved or paid towards it. It could move £600 a month into a separate tax account. If income is uneven, it could instead divide £7,200 by expected annual receipts and move that share of each payment.

For example, £7,200 divided by £60,000 of expected receipts is 12%. That is not a recommended tax rate. It is simply one business converting its own estimate into a cash-saving rule.

Recheck the estimate when a large job lands, costs change or every few months. Increase or reduce the transfer rather than carrying on with a percentage that no longer fits.

Allow for payments on account

Payments on account are advance payments towards the next Self Assessment bill, including Class 4 National Insurance. Each payment is normally half of the previous year's relevant tax bill, due on 31 January and 31 July.

HMRC says they are not normally required when the previous bill was less than £1,000 or more than 80% of the tax was collected outside Self Assessment. Your online account or statement shows whether they apply.

This can make the first large January payment feel much bigger than one year's balancing bill. Illustrative first-payment example: assume the previous year's liability is £7,200, all of it is Income Tax and Class 4 National Insurance relevant to payments on account, nothing has already been paid or deducted, and no exception applies. The £7,200 balance plus a £3,600 first payment on account would make £10,800 due that January. The second £3,600 would normally follow in July. Capital Gains Tax and student loan repayments are not included in the base used to calculate payments on account. Later balancing adjustments depend on the actual bill.

Check HMRC's payments on account explanation.

Reconcile what is due with what you have saved

Use the amount and dates shown in your HMRC account once the return is filed. Subtract payments already credited before deciding how much more cash you need. A tax estimate, the current account balance and the next amount payable are three different figures.

If income falls, you may be able to reduce payments on account. Check the forecast carefully first: reducing them too far can leave interest to pay. Do not assume a quieter month means the whole year's liability will fall by the same proportion.

Know the dates

For most online Self Assessment returns, the filing and balancing-payment deadline is 31 January following the end of the tax year. A second payment on account, where required, is due on 31 July.

Filing earlier does not bring the payment deadline forward. It does tell you the confirmed amount sooner, which gives you time to correct the tax pot.

HMRC lists the current Self Assessment deadlines.

Keep the tax pot separate

A separate savings account does not change the tax calculation, but it makes the reserved cash harder to confuse with money available for materials or drawings. Reconcile it with the estimate rather than assuming the account balance must be right.

If you are VAT registered, plan separately for the net VAT payment due under your scheme. Do not assume money held for VAT is available to cover Income Tax as well.

Written by Chris, founder of TradePilot. General information, not tax or financial advice. Examples explain a method; they are not recommended savings percentages. Last reviewed 16 September 2026 against the official sources linked above.