Is income tax included in the cash payments operating expenses budget?

Hi,

I would include income tax as an outgoing in a cash or cashflow budget, as it has to be paid. The money comes out of your bank, or the bank that you are budgetting for, so it needs to be allowed for in order for you to get close to the real situation that is likely to occur. The ultimate purpose of the budget is to predict your peak overdraft, or funding needs.

Personally I would calculate tax as a percentage of taxable income. Being a tax accountant I can do this. However, if you aren't tax minded I would try calculating a percentage based on the past couple of years gross revenue, assuming that things are constant.

One of the weaknesses of budgetting is the assumptions that you have to use. But don't let that put you off the exercise. Just remember that we live in an imperfect world and you are to some extent moDELLing imperfection. But you can still get close if you develop the skill, and continual practice will develop your skill. :)