How much tax to set aside: a calculator for sole traders and limited companies
By Chris
Enter what you expect to earn and spend this year. The calculator estimates Income Tax and National Insurance for a sole trader, or Corporation Tax for a company, adds VAT if you are registered, and turns the total into a percentage of every payment to move into a tax pot. It uses 2026/27 rates from GOV.UK.
Tax set-aside calculator
An estimate using 2026/27 rates from GOV.UK. It is not tax advice and does not replace your accountant. Nothing you type is stored.
Your sales or fees for the year: what lands in the account from customers.
Costs you can deduct from income: software, equipment, materials, travel. Not your own drawings or salary.
Suggested Tax Pot setting
16% of each incoming payment
That puts aside about £7,132 over the year against an estimated bill of £7,132, rounded up to a whole percentage.
- Assumes the business is your only income and you have a standard Personal Allowance of £12,570, tapered above £100,000. Class 4 is 6% between £12,570 and £50,270, then 2%.
- In your first years, Self Assessment payments on account can make one January bill much bigger than a single year’s tax. See GOV.UK on payments on account.
How to set the percentage up in the app: Monzo Business Tax Pots explained.
The calculator is above. Below is what it calculates, the 2026/27 rates it uses with a link to each, and the things it deliberately leaves out. It is an estimate to size a savings habit, not a tax return.
Why a percentage of each payment
Tax bills arrive long after the money that caused them. A sole trader’s tax for 2026/27 is paid through Self Assessment in instalments running from January 2027 to January 2028; a company pays Corporation Tax nine months and a day after its year end. In between, the money sits in the account looking spendable.
Moving a fixed share of every payment as it lands solves that without anyone having to remember. Monzo Business does this with Tax Pots: a percentage of every incoming payment, moved automatically, on Pro and Team, with up to 3 Tax Pots. Our guide to Monzo Business Tax Pots covers setting one up. Other accounts have similar tools; the percentage this calculator gives works with any of them, or with a standing order to a savings account.
The percentage is of money coming in, not of profit, because that is what a pot sees. That is why the calculator asks for expenses too: the more of your income is spent on allowable costs, the smaller the share that needs to go to tax.
Sole traders: Income Tax and Class 4 National Insurance
A sole trader pays Income Tax and National Insurance on profit: income less allowable expenses. For 2026/27 in England, Wales and Northern Ireland, the calculator uses the bands on GOV.UK’s Income Tax rates page:
| Band | Income | Rate |
|---|---|---|
| Personal Allowance | Up to £12,570 | 0% |
| Basic rate | £12,571 to £50,270 | 20% |
| Higher rate | £50,271 to £125,140 | 40% |
| Additional rate | Over £125,140 | 45% |
The Personal Allowance falls by £1 for every £2 of income above £100,000, and is zero at £125,140. The calculator applies that taper, which is why the percentage climbs steeply for profits in that range.
On top comes Class 4 National Insurance, from GOV.UK’s self-employed National Insurance page: 6% on profits between £12,570 and £50,270, and 2% above that. Class 2 contributions are no longer charged: with profits of £7,105 or more they are treated as paid to protect your National Insurance record, and below that you can choose to pay voluntarily.
The calculator assumes the business is your only income. If you also have a salary, part of your allowance and basic-rate band is already used, so the right percentage will be higher than the one shown. Sole traders with qualifying income over the threshold also now keep digital records under Making Tax Digital; our Making Tax Digital for Income Tax guide explains who that applies to, and Monzo offers free Making Tax Digital for Income Tax software, built on Sage for sole traders and landlords.
If you live in Scotland
Scottish taxpayers pay Scottish Income Tax on self-employed profits, with more bands. Tick “I live in Scotland” and the calculator switches to the 2026/27 rates on GOV.UK’s Scottish Income Tax page, which with a standard Personal Allowance are: starter 19% to £16,537, basic 20% to £29,526, intermediate 21% to £43,662, higher 42% to £75,000, advanced 45% to £125,140, top 48% over £125,140. National Insurance is set UK-wide, so Class 4 is the same wherever you live.
Limited companies: Corporation Tax
A company pays Corporation Tax on its taxable profit. For financial year 2026, which started on 1 April 2026, HMRC’s Corporation Tax rates page sets a small profits rate of 19% for profits up to £50,000 and a main rate of 25% for profits over £250,000. Between the two, the company pays the main rate less Marginal Relief, using a standard fraction of 3/200. The effect is a marginal rate of 26.5% on profit in that band, and an average rate that climbs gradually.
The two thresholds are divided by the number of associated companies and cut pro rata for an accounting period shorter than 12 months. The calculator assumes a single company with a full year; if either is not true, the real bill will be higher.
Limited company mode only covers the company’s own tax. What you pay personally on salary and dividends is separate, and our guide to paying yourself from a limited company explains how directors usually handle it.
Adding VAT
Registration is compulsory once taxable turnover passes £90,000 in a rolling 12 months, according to GOV.UK’s VAT registration guide, and many businesses register voluntarily below that. The standard rate is 20% (GOV.UK VAT rates).
Tick “VAT-registered” and enter your income including VAT. The calculator takes one sixth of it as the VAT you charged, takes one sixth of the expenses you say had VAT on them as the VAT you can reclaim, and puts the difference aside. It also strips VAT out before working out profit, because VAT is not income. This is deliberately simple: it assumes everything you sell is standard-rated and ignores the Flat Rate Scheme, zero-rated or exempt sales and partial exemption. If any of those apply, use the figure as a ceiling and ask your accountant.
Worked examples
A sole trader in England with £45,000 coming in and £5,000 of expenses makes £40,000 profit. Income Tax is £5,486 and Class 4 is £1,646, a total of £7,132. That is 15.8% of the money coming in, so the calculator suggests a Tax Pot of 16%.
A limited company with £80,000 of profit is in the Marginal Relief band. Corporation Tax is £17,450, an average rate of 21.8% of profit. How that translates into a percentage of income depends on how much the company spends, which is what the calculator asks.
What the estimate leaves out
- Payments on account. Once your Self Assessment bill passes £1,000, HMRC usually asks for advance payments towards next year in January and July. In the first year this can mean paying a year’s tax plus half of the next at once. GOV.UK explains payments on account.
- Other income, student loan repayments, pension contributions, Gift Aid and the trading allowance.
- Capital allowances and the difference between accounting profit and taxable profit.
- Timing. The percentage assumes income arrives evenly. A lumpy year needs a check-in halfway through.
If you are choosing an account partly for its tax tools, the best accounts for sole traders and the best accounts for limited companies compare them, and the plan picker shows which Monzo plan includes Tax Pots.
Frequently asked questions
What percentage should a sole trader put aside for tax?
There is no single figure, because the personal allowance means the first £12,570 of profit is tax-free and rates rise in bands. A basic-rate sole trader with modest expenses often lands somewhere between 10% and 20% of what comes in. Higher-rate profits push it up. The calculator works out your own figure from 2026/27 rates.
What rate of Corporation Tax will my company pay?
For financial year 2026, 19% on profits up to £50,000 and 25% on profits over £250,000. In between, the main rate applies less Marginal Relief, giving an effective rate that rises smoothly from 19% to 25%. Thresholds shrink if you have associated companies or a short accounting period.
Should VAT go in the same pot as Income Tax or Corporation Tax?
It is usually clearer to keep it separate, because VAT is due every quarter while Income Tax and Corporation Tax are due once or twice a year. Monzo Business allows up to 3 Tax Pots, so one for VAT and one for the annual tax bill is a common set-up. The calculator shows the split when you tick VAT-registered.
Are these 2026/27 rates confirmed?
Yes. Every rate and threshold in the calculator was checked against GOV.UK on 9 October 2026 for the 2026/27 tax year (financial year 2026 for Corporation Tax), and each source is linked on this page. Rates can change at a Budget, so we re-check after each one.
Does the calculator include tax on dividends from my company?
No. Limited company mode estimates Corporation Tax, and VAT if you tick it. Tax on the salary and dividends you take as a director is personal tax, paid through PAYE or Self Assessment, and depends on your other income. Your accountant can give you a figure to set aside personally.
Is a Tax Pot the same as paying HMRC?
No. A Tax Pot is money you have moved aside in your own account; nothing goes to HMRC until you pay the bill. The point is to make sure the money is there when it is due, and not mistaken for spare cash in the meantime.
Sources
- GOV.UK: Income Tax rates and Personal Allowances (6 April 2026 to 5 April 2027)
- GOV.UK: Scottish Income Tax rates 2026 to 2027
- GOV.UK: Self-employed National Insurance rates (2026 to 2027)
- HMRC: Rates and allowances for Corporation Tax (financial year 2026)
- GOV.UK: Corporation Tax rates and Marginal Relief
- GOV.UK: VAT rates
- GOV.UK: When to register for VAT
- GOV.UK: Self Assessment payments on account
- Monzo Business Tax Pots
- Monzo Business Making Tax Digital
Figures last checked 9 October 2026. If something has changed, tell us and we will correct it.
Related reading
- Tax potsHow Monzo Business tax pots work: automatic set-aside percentages, which plans include them, and how a limited company uses them for VAT and Corporation Tax.
- Paying yourselfHow limited company directors pay themselves: salary, dividends and expenses, the director's loan account, and how to set it up in your business bank.
- MTD for Income TaxWho must use Making Tax Digital for Income Tax and when: the £50,000, £30,000 and £20,000 thresholds, quarterly updates and compatible software.
- Sole tradersThe best UK bank accounts for sole traders compared: free plans, tax pots, Self Assessment tools and whether you need a business account at all.