How much tax should I reserve before reordering?
Reserve an amount based on forecast taxable profit and your wider income, rather than a fixed share of sales. Budget separately for any January balancing payment and payments on account, then test what cash remains for reordering. Ask Cambridge China Bridge for the supplier payment schedule.
Start with taxable profit, not sales receipts
This guide is for a sole trader selling imported stock alongside any employment. Income Tax is calculated after deducting allowable expenses from business income. Ask your accountant to forecast taxable profit using your accounting method. Our cash-basis stock-payment guide explains purchase-payment timing; do not assume your batch margin is the tax figure.
Prepare expected sales, refunds, stock payments, freight, selling fees and overheads for the forecast. Keep the management view in profit and cash planning separate from the tax calculation. Use actual records where available and mark uncertain costs for review.
Include your employment in the forecast
You get a single Personal Allowance for the tax year across your income sources. Do not give the stock business a fresh allowance after using it against wages. Give your accountant your gross employment income, bonuses, tax already deducted and expected trading profit. Ask for the remaining Self Assessment amount after accounting for tax already paid.
National Insurance needs its own calculation: HMRC says the amount depends on combined wages and self-employed work. Ask your accountant to estimate the contribution alongside Income Tax, using the relevant tax year and your circumstances. Update the forecast when pay, working hours or expected stock sales change.
Build a reserve you can update
Ask for a forecast showing the tax and National Insurance still to fund, payments already made and expected payment dates. Subtract money already held in your tax pot from the amount still needing funding. Spread the remaining saving across expected bank receipts before those dates. Treat any resulting share of sales as your budgeting setting, and review it as the forecast changes.
Transfer the planned amount into a separate pot when sales money reaches your bank. Keep VAT funding and money for refunds separate. If receipts fall behind, compare the reserve with the revised forecast before releasing money for a factory deposit. A larger bank balance alone does not establish that a reorder is affordable.
Allow for the January and July cash demand
Payments on account include an advance towards Class 4 National Insurance. HMRC describes each payment as half the tax owed last year, due by midnight on 31 January and 31 July. Ask your accountant whether they apply and confirm the qualifying amount, rather than halving the tax shown on your employment payslips.
A balancing payment is normally due on 31 January after the tax year ends. That means January can require money for the previous year's outstanding bill alongside an advance towards the next bill. If you have made no earlier payments on account, plan for that overlap before reordering. Label each planned payment with the tax year it funds.
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Test the reorder after protecting tax money
Add the dated tax payments to your China-order cash-flow calendar. Mark transfers into your reserve as money earmarked within your accounts; record the payment to HMRC when it actually leaves. Avoid treating both movements as separate costs. Likewise, do not add payments on account to a tax forecast that already includes the same liability without reconciling them.
Test slower sales and a larger tax estimate alongside the proposed deposit, balance, freight and launch spending. If the plan needs your tax pot to complete the reorder, reduce or postpone the order. Ask your accountant to review changed profit expectations before altering planned tax payments. Cambridge China Bridge's staff in China can obtain supplier invoices and payment schedules for that review.
Frequently asked questions
What percentage of stock sales should I save for tax?
Calculate the amount from forecast taxable profit, wider income and tax already paid. Divide the remaining funding need across expected receipts before payment dates, then update your saving plan as sales change.
Does my employed job cover tax on my stock business?
Do not assume it does. You share a Personal Allowance across income sources. Ask for a forecast using gross wages, employment tax already deducted and trading profit, with National Insurance calculated separately.
Why can my first January tax payment be larger?
January can bring the previous year's outstanding bill and a payment on account towards the next bill together. Budget for both before committing sales proceeds to replacement stock.
Can I use my tax reserve to pay a factory deposit?
Protect the amount your updated forecast still needs. Test the deposit and later order payments after earmarking tax money. If the reorder depends on spending that reserve, reduce or postpone it.