This varies according to your business and Tempo can give specific advice for your business. As a general rule of thumb the following applies:
- Leave all of the VAT amount in the business account, as much of this will be needed to pay your VAT bill later.
- In addition, leave at least 20% of the Net invoice amount (Net does not include VAT) to cover tax bills due later.
Also, if you make other regular payments from your business account (e.g. for suppliers or employees) you will need to make sure there is also enough cash available for this.
Simple example:
You send an invoice to your client for £1,000 + VAT and your client pays the full amount (£1,200 including the VAT). We’d suggest leaving the full £200 VAT amount in your business account. We would also suggest leaving 20% of the Net in the business account (0.2 X £1000 = £200). The remaining 80% is available for your personal payment - in this case (0.8 X £1000 = £800). Following this rule you’d take £800 and leave £400.