The 3 Jar Method: How Business Owners Can Effectively Save for Tax
💼 The 3 Jar Method: How Business Owners Can Effectively Save for Tax
Running a business means wearing all the hats — and for company directors, staying on top of tax can be one of the most stressful parts.
Whether you’re paying Corporation Tax, VAT, or juggling dividends, rental income, or investment profits, one thing is certain:
The key to avoiding panic when tax bills are due is getting organised beforehand.
And that’s where my simple system — the 3 Jar Method — comes in.
🫙 What Is the 3 Jar Method?
It’s a straightforward, practical way to separate your business income into clear “pots” — or jars — so you always know what money is really available and what’s spoken for.
Set up three separate business accounts, and every time income lands, move a portion into each one. Do it with standing orders, and it all happens automatically.
Let’s break them down:
🫙 Jar 1: Corporation Tax Jar
This jar is where you stash away 20% of your company’s profits to cover your Corporation Tax bill.
This way, when your accountant runs your year-end accounts, you’ve already got the funds sitting there. No shock bills, no robbing Peter to pay HMRC.
🫙Jar 2: VAT Jar
If you’re VAT-registered, set aside 20% of everything you receive into this jar — straight away.
Yes, you’ll often reclaim VAT on your expenses, but this keeps your VAT liability out of your day-to-day cash flow and ensures you’re never caught short.
🫙 Jar 3: Operational Funds Jar
This is the jar you actually use to run your business — paying staff, suppliers, subscriptions, and anything else you need to keep things moving.
By keeping this separate, you can confidently spend and plan, knowing your tax money is safely out of reach.
💷 What About Your Personal Tax?
If you’re taking dividends or earning rental income or investment income, you’ll also need to think about:
Income Tax
National Insurance (especially if you also take a salary)
Since these are personal liabilities, it’s wise to create an extra personal tax pot and save 20–30% of that income throughout the year.
Trust me — your future self will thank you when January rolls around.
🫙 Why the 3 Jar Method Works:
✅ It takes the emotion and stress out of tax
✅ You’re never spending what’s already earmarked for HMRC
✅ You can plan and grow your business with confidence
✅ No more panic when payment deadlines roll around
Ready to Make Tax Feel Less Scary?
The 3 Jar Method is one of the easiest, most effective ways to keep your business tax-ready all year long.
If you’re unsure how to get started or want help tailoring the setup to your business, I’d love to help you make it work.
Let’s make cash flow feel calm, not chaotic.
Lisa x
Team TaxTalks
