I’m a little confused about the tax pots.
First, VAT isn’t a fixed percentage, so I cannot put money away for that, unless I just do 20%
Second, Corporation tax is paid after expenses etc. but it doesn’t seem the tax pot takes this into account? It’s just 20% of any money into my account?
Tax Pot’s currently just move a % of income in the account to the pot automatically. There isn’t any more logic to it then that. From what I understand they aren’t made for VAT, but corporation tax.
This is the explanation on the create screen for Tax Pots:
And this is what the setup for the pot looks like:
Thanks Dan.
I’m struggling to see how this is useful as it just moves a flat percentage from my income, rather than moving a percentage of profit.
I guess it would be more helpful if I could highlight regular applicable payments to deduct from the income total for it to calculate profit before moving the money.
Would probably also be useful to have the actual corporation tax percentage there, or allow me to set it manually.
I’ll continue to just move money manually to cover the bill I think. I’ll be moving far too much at 20% currently.
I agree, I don’t think it’s particularly useful either.
It’s sold as a peace of mind feature, leave on and forget about your tax. At the end of the year, you’re likely to have money you can withdraw back out.
I’m very hands with the financials so this offers very little utility to me. I’d rather move the money myself and it be more accurate.
Yeah, I imagine in typical Monzo fashion, this is v1 of Tax Pots, and over time they’ll become increasingly smart as the business account becomes more fleshed out. Only time will tell!
Down the line more suggested features added for the less financial savvy its a good feature and at the end like you say a little extra back more than you’d get from any legacy bank App unless you have dedicated account manager/accountant
I’m going to resurect this thread because I’ve just heard of this feature and was puzzled as well as to its use. I can see one way an automation could help people with (very simple) tax, but this isn’t it.
If you are using a business bank account and ensuring all money goes through it - income and expenses, then it’s contents will be your profits.
If you know roughly how much you want to put aside for tax, eg 25%, then the automation should happen when moving any money to your personal account.
Example. You have £10,000 in your business bank account. You’ve decided you want to keep 25% of profits aside for tax. You’ve made sure all expenses came out of that account as well as income in. So it’s your profit. Monzo does nothing as money comes in and out of that account, but if you try to transfer £500 to your personal account, it prompts you to transfer 25% to a tax pot because you’re taking £500 out of the business account early and you might want the tax for that amount kept aside.
I think you misunderstand this feature.
Money coming into your business account is the gross amount from an invoice, subject to possible corporation tax and VAT. The idea behind this feature is to put aside the VAT and to account for potential corporation tax in a pot so it is separate from the rest of the funds which would be potential profit (subject to additional expenses etc.)
This isn’t a solution to put aside money for personal taxes such as a self-assessment.
Example. You invoice for £10,000 and when that money reaches your business account you put aside 25% to account for the VAT and Corporation tax due on that money, leaving profit left for you to withdraw to your personal account as personal income.
I can see the use in this feature - it’s what I do currently, although I don’t have access to the feature because I have a free business account. I am a sole trader.
I take 40% of all income into my account and put it in a pot (20% tax, 11% NI and 9% student loan).
I know my actual tax will be less than this because of personal allowance and tax-deductible expenses (of which I have very few) so it also acts as a means of savings.
But I can understand that this may be a fairly niche position, in the sense of few expenses and the ability to save along earning.
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