We want to make being self-employed easier than being employed. When you’re employed, tax gets taken from you before you get paid, which simplifies your budgeting quite a lot.
But getting paid before tax makes budgeting hard. You have to set aside typically 20-30% of your income for tax bills that you pay every 12 months (or 6 months on payments on account).
It’s common for people to set aside 20% or more of the income they get into a separate account, ready for their year end tax bill. It’s also pretty common for people to not set aside the money, and get caught out at the end of the year.
It’s a similar story with corporation tax for limited companies, or quarterly VAT bills for VAT registered businesses.
How we’re approaching this
This has been a long time coming. It’s one of our 2019 regrets that we didn’t get this done. And so we are now going to work on this after we’ve tackled Reports on your income, expenses, profit and more.
There are two elements we want to tackle:
1 - Setting your money aside
What we’d like to do is set up an automated saving feature that identifies when you’ve been paid and how much, and then deducts a % of your choosing and transfers it to a Coconut Vault, or other savings account of your choosing.
Once you’ve set up this rule, you can then just let it run without having to worry about moving money around every time you get paid.
2 - Storing the money
We can create sub-accounts that let you move money in and out of them. This means that every time you get paid, you can move a portion across of your choosing, for safe keeping.
This would be much like a Coconut current account, meaning it would be facilitated by our banking partner, PPS. It’s what’s called an e-money account and your money is not put at risk (ie it’s not lent out) and as such there’s no interest on it.
We think a better solution over time will be to let you move money into other accounts besides this one, that do get interest, that you can then connect to Coconut.
- Do you save for tax today?
- How do you save for tax today?
- Where do you send the money to?
- What % do you set aside?
- Have payments on account ever caught you out?
- Do you want to set aside money into Coconut account, or into a separate account with another bank?
- How do you like the automated saving rules idea?
- What do you think is more useful for you - auto-saving to an external account, or manually moving money into a Coconut vault?