10 practical budgeting tips if you’re on an irregular income

If you started your business in the last tax year (6 April 2024 to 5 April 2025), an important deadline is coming up.

You must register for self-assessment with HM Revenue & Customs (HMRC) by October 5th - that’s this Sunday.

Missing the deadline can lead to penalties and interest charges, which is the last thing you need as a self-employed person.

After all, you won’t always be earning the same amount from one month to the next, so managing your money can be particularly tough.

So how can you - as a self-employed person - make sure you’re on the front foot with your finances?

1. Save in your high-income months

During those months when your income is higher, set aside some of the extra money.

It could serve as a useful buffer during those quieter months of the year.

2. Identify seasonal peaks and troughs

Work out when your income usually dips and plan ahead for these months.

You’ll then have a good idea of when you should set extra money aside, scale back your own personal spending, and possibly look at alternative income streams to keep you afloat.

3. Track your expenses in real-time

The self-assessment tax return deadline is on 31 January each year.

And if you’re busy trying to run a business, it can be tempting to leave getting your receipts in order to the last minute.

But you’ll only be making the process harder than it needs to be.

Use an app, spreadsheet, or even just a notebook to record your income and spending as you go.

This makes filling in your tax returns easier and helps you keep track of where your money’s going, as well as plan for and identify late payments from customers quickly and easily.

4. Keep your business and personal finances separate

Open a separate bank account for your business income and expenses. 

That’ll make it easier for you to manage your cash flow and set money aside for tax.

5. Pay yourself a fixed amount

Work out how much you need to cover the cost of bills and other essentials and aim to pay yourself that amount from your business account. 

Anything extra can then stay in the business pot so you can build up a financial safety net.

6. Create a tax savings pot

Self-employed people have to report their earnings to HMRC rather than have tax deducted automatically. 

So it’s worth preparing for that by putting a percentage of your income – possibly around 20 to 30% - aside for tax and national insurance purposes.

Obviously, that could be too much or too little depending on how much you make, so it might be worth speaking to an accountant to work out the right percentage based on your earnings.

You could also keep this money in a separate savings account so you’re less tempted to dip into it.

7. Budget using your lowest expected income

Instead of planning based on your best month, set your budget around your average or even your lowest monthly income. 

That’ll help you avoid stretching your finances too far when business is slow.

8. Prepare for future expenses 

Make sure you’re ready for upcoming expenses, such as equipment purchases and renewing your insurance.

If you’re not prepared, occasional or one-off costs can knock your finances off course and disrupt your plans for your business.

9. Be ready for deadlines

Make sure you’ve got important deadlines on your calendar, such as the self-assessment deadline and the end of the tax year, so you’re not taken by surprise.

10. Build an emergency fund

There will be months where business is slow, or you’re dealing with issues like late payments from customers.

So ideally, you want to have a financial reserve equivalent to about three to six months of essential expenses, so these don’t have a disproportionate effect.

That’s why it’s so important to keep a close eye on what’s coming in and going out.

If you’re on top of that, you’ll know how much money you can afford to put aside throughout the year and be able to create a financial cushion.