# Income and Provisional Tax

**URL:** <https://forum.manager.io/t/income-and-provisional-tax/34050>\
**Category:** Uncategorized\
**Created:** [March 29, 2021, 2:21am UTC](https://forum.manager.io/t/income-and-provisional-tax/34050 "2021-03-29T02:21:49Z")\
**Posts on this page:** 1\
**Showing post:** 7

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**Author:** ![Patch](https://avatars.discourse-cdn.com/v4/letter/p/a183cd/32.png) [@Patch](https://forum.manager.io/u/Patch)\
**Post date:** [March 30, 2021, 9:35am UTC](https://forum.manager.io/t/income-and-provisional-tax/34050/7 "2021-03-30T09:35:37Z")

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> [@Pix](#):
>
> What would be the best way to do that?

My understanding is there are two divergent approaches

1. For a sole trader the business owner just pays personal income tax like any other person. There is no tax deduction for the business owners personal income tax so your accountant does not need to see it in the accounts. It is paid out of owners equity and need not be shown in the the business accounting software at all as described by Tut

2. For a sole trader personal income tax is likely to be the largest bill paid particularly if a business is growing. The bill can be paid almost 2 years after the income is earned. For a sole trader business working capital is the same thing as personal cash flow and if not adequately planned for, cash flow could result in insolvency or at least unexpected business costs. With this perspective sole trader income tax provisioning can be set up in an analogous manner to a company as described by AJD and [PAYG Clearing - #24 by Patch](https://forum.manager.io/t/payg-clearing/4282/24)

Both are reasonable approaches. With a stable income the benefit of option 2 is reduced as the tax authority already collects provisional tax (which is a reasonable estimate when business income is stable). Option 1 is less accounting work but option 2 is not that hard to do either.

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