Martin Lewis has explained a key savings rule that people often misunderstand, causing “huge problems” and surprise tax bills. He shared some important life lessons that everyone should know in a recent episode of his BBC podcast.

One of his top tips is an important one to note or you may have end up having to pay “a whack of cash” to HMRC at short notice. Mr Lewis pointed to an important difference between how tax works depending on your work situation that many people don’t understand.

He explained: “For employees, you are paid via the payroll and that means tax is normally taken off, so what goes into your bank account is your money to spend. If you’re self employed or freelance, you are normally paid before tax.

“Misunderstanding that causes huge problems for many young – and some not so young – people.” In light of this, he set out a rule of thumb to follow about how to structure your finances if you are self-employed or a freelancer.

The expert said: “So for every £100 you earn, put £30-ish straight into a separate bank account, preferably a high-interest savings account. At the end of the year, when the tax bill comes, you’ve got the money sitting there to pay it.

“You might have a little left over to go and treat yourself, but do not touch that account until your tax is paid.” He reiterated the importance of not withdrawing from this savings account until the tax is due.

Mr Lewis warned: “Do not think of it as your money. It’s no longer your money, you’ve paid it into that account and it’s pre-empting what you’re going to pay in the tax bill.”

He said you can end up in dire straits if you have to find these funds at short notice. Mr Lewis said: “Have that money put aside to do it. It’s absolute hell to if you haven’t and suddenly you’re having to find that whack of cash.”

His warning is very timely as the deadline to file your self assessment tax return is just days away. Anyone who needs to file a tax return for the previous tax year online has to do so by the end of January 31.

You will get a late filing penalty if you fail to do so. There is an initial penalty of £100 with extra amounts added on depending on how long you take to get in the key document.

For the latest money saving tips, shopping and consumer news, go to the new Everything Money website.