Working it out
- List what is due. VAT, PAYE, UIF and SDL, and provisional tax if it applies to you, for the next 90 days.
- Add it up. Use your last returns and your accountant's estimates.
- Money set aside. What you have put away for tax, in a separate account or as a note of the amount.
- Divide. Money set aside divided by tax due.
PAYE is due on the 7th of each month. VAT is usually due every two months. Provisional tax is paid at the end of August and the end of February. The tax and company deadline reminders tool emails you before each date.
An illustration
The figures are invented to show the arithmetic. They are not what any business should expect.
| VAT due | R35 000 |
| PAYE, UIF and SDL due (three months at R12 000) | R36 000 |
| Provisional tax due | R19 000 |
| Tax due in 90 days | R90 000 |
| Money set aside | R45 000 |
| Tax cover | 50% |
Half the tax is covered. The other R45 000 still has to come from future cash.
Read it against your own situation
- Last month. Is your tax cover rising or falling?
- Your next due date. How many days away is it?
- Your available cash. Could it cover the shortfall?
What a change could be revealing
| The signal | It could be revealing | Check | You could |
|---|---|---|---|
| Well below 100% | VAT you collected may have been spent as cash, or profit may be leaving before tax is paid | VAT collected less VAT paid this period, against what you set aside | Move tax money aside as each payment arrives |
| A bill you did not expect | A large VAT period, or a provisional tax estimate that was too low | What is in the bill | Ask your accountant for a provisional tax estimate before each payment |
| Above 100% and growing | You may be setting aside more than is due, or a refund may be expected | Amounts due against amounts set aside | Release the surplus, or keep it as a buffer on purpose |
| You are not sure what is due | Your records may be behind | Your last VAT201 and EMP201 | Ask your bookkeeper for a list of what is due and when |
| Tax money is used for other bills | Cash may be under pressure | Runway and available cash | Treat it as a signal to look at cash, and put the tax money back first |
Try it
List the tax due in the next 90 days and the amount you have set aside. It takes about ten minutes.
Questions people ask
How much should I set aside each month?
There is no set figure. Work out what is due in the next 90 days and divide it by three.
Do I need a separate bank account for tax?
It helps, because it makes the money harder to spend. It is not required.