Accountants Tax Reserve (Monthly) Calculator
Estimate how much of your monthly business profit to set aside for income tax and other profit-based contributions.
Overview
Use this monthly tax reserve calculator to estimate how much business profit to move aside for income tax and other profit-based contributions. Enter your typical monthly revenue, allowable expenses, estimated rates, and an optional safety buffer.
How it works
The calculator first estimates taxable profit by subtracting allowable expenses from monthly revenue. It applies your combined income tax and contribution rates to that profit, then adds your selected buffer. The annual figure simply multiplies the monthly reserve by 12, so it is most useful when your income pattern is reasonably steady.
How to use this calculator
- 1Enter your average monthly business revenue before expenses.
- 2Add your estimated monthly allowable business expenses.
- 3Enter your expected income tax rate and any other profit-based contribution rate.
- 4Choose an extra buffer for uncertainty or future adjustments.
- 5Review the monthly reserve amount and transfer that amount to a separate account if appropriate.
Example Calculation
Monthly business revenue
$8,000
Monthly allowable expenses
$2,500
Estimated income tax rate
25%
Other profit-based contribution rate
10%
Extra reserve buffer
5%
Recommended monthly tax reserve
$2,021
With monthly revenue of 8,000 and expenses of 2,500, estimated taxable profit is 5,500. At a combined 35% rate plus a 5% buffer, the suggested monthly reserve is about 2,021.
Frequently asked questions
What is a monthly tax reserve?
A monthly tax reserve is money set aside from business profit to help cover future income tax and profit-based contribution bills.
Should I calculate the reserve from revenue or profit?
For profit-based taxes, the reserve is usually estimated from profit: revenue less allowable business expenses. Sales taxes and other transaction taxes may need separate tracking.
What rate should I enter?
Use your own reasonable estimate of the total rates that apply to your business profit. If different taxes or contributions apply, enter their combined estimated rate across the two rate fields.
Why add a tax reserve buffer?
A buffer can help account for changing income, incomplete expense records, rate changes, or adjustments when your return is prepared.
Does this include sales tax or VAT?
No. This calculator is designed for taxes and contributions based on profit. Sales taxes collected from customers are generally best tracked separately.
Is the annual reserve an actual tax bill?
No. It is a simple projection based on twelve similar months and the rates you enter. Actual liabilities may differ.
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Assumptions and warnings
Assumptions
- Revenue and allowable expenses are estimated on a monthly basis and remain broadly consistent throughout the year.
- The entered income tax and contribution rates apply to all estimated taxable profit.
- The calculation excludes sales taxes collected on behalf of tax authorities, tax credits, loss relief, thresholds, payments on account, and filing adjustments.
- The extra buffer is added after estimated tax and contribution liabilities are calculated.
- Results are planning estimates rather than a calculation of an actual tax bill.
Warnings
- This calculator provides an estimate only and is not tax or financial advice.
- Tax rules, rates, deductions, thresholds, and payment schedules vary by location and individual circumstances.