Being a sole trader in New Zealand is awesome – you're in charge, you set your own hours, and you get to do what you love. But there’s one thing you need to remember in between the hustle: taxes. It might sound boring, but if you don’t plan for your tax bill, you could end up in a bit of a pickle when the time comes to pay. Here’s why setting aside money for tax is super important for sole traders in NZ and how you can do it without breaking a sweat.
Tax Is Inevitable (But Not a Crisis)
As a sole trader, you’re responsible for your own taxes. Whether it’s income tax or GST (if you’re registered), you’ll need to pay your share to the government – it’s just part of the deal.
Now, we get it – taxes aren’t the most exciting thing to think about. But here’s the thing: if you leave it until the last minute to worry about your tax, you might end up scrambling to find the cash. And let’s be real – that’s stressful. Instead, a little planning now can save you a heap of stress later.
Avoid the ‘Oh No, I Forgot About Tax!’ Moment
We’ve all been there, right? You’re trucking along, doing your thing, and then bam! – tax time hits, and you realise you didn’t save enough. That’s when the panic sets in.
But guess what? It doesn’t have to be like that. By saving a little bit each month for tax, you’ll avoid that dreaded moment when you check your balance and think, “How am I going to pay this?!”
A simple rule is to put away a percentage of what you earn each time. Just set it and forget it – you’ll thank yourself when tax season rolls around.
Get Ahead with a Separate Savings Account
One of the easiest ways to save for tax is by setting up a separate savings account. You don’t need to overcomplicate it – just pick an account that’s separate from your day-to-day spending, even better if it’s one you cannot access easily.
Every time you make money, stash a chunk of it in this account. If you’re unsure how much to save, a good starting point is 20-30% of your income. It sounds like a lot, but remember, the sooner you put it away, the easier it’ll be when it’s time to pay.
And don’t worry about not being able to access it – that’s the beauty of a separate account. You’re still in control, but the tax money is safely tucked away, ready for when you need it.
A Little Effort Now = A Lot Less Stress Later
We get it – there’s always something more exciting than thinking about taxes. But trust us, saving for tax doesn’t have to be painful. In fact, it’s one of the easiest ways to reduce stress, keep your business running smoothly, and avoid any surprises when the tax payments come due.
It’s a simple step that leads to a big payoff – less stress, more control, and no surprises. Because let’s face it – taxes are part of life, but they don’t have to ruin your day.
