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Freelancer Tax Set-Aside Calculator

Work out how much of each client payment to put aside for income tax and social contributions, in any country, so the tax bill is never a surprise.

Your numbers

$
%

Deductible costs such as software, equipment and a workspace.

%

Your expected average (effective) rate, not your top bracket.

%

For example, US self-employment tax works out to about 14.1% of profit.

$

Set aside from this payment

$579.70

Share of every payment to set aside

29.0%

Set aside per month
$1,739
Per quarter (for estimated payments)
$5,217
Per year
$20,869
The math behind it

  1. Profit share

    100% − 15%equals85%

  2. Set-aside rate

    85% × (20% + 14.1%)equals28.99%

  3. From this payment

    $2,000.00 × 28.99%equals$579.70

Employees have tax taken out before they are paid. Freelancers don't, so every payment you receive contains money that belongs to the tax office. The safest habit is to move a fixed share of each payment into a separate account the day it arrives.

How it works

Tax is charged on profit, not on everything clients pay you. So first remove the share of income you spend on deductible business expenses.

Then apply your combined rate: income tax plus self-employment or social contributions. Use your expected average rate for the year, which is lower than your top bracket in countries with progressive tax.

The result is a single percentage to apply to every payment. The quarterly figure helps in countries, like the US, where freelancers pay estimated tax four times a year.

A worked example

From a $2,000 payment, 15% goes on expenses, leaving $1,700 of profit. At 20% income tax plus 14.1% social contributions, a combined 34.1%, you set aside $579.70, which is 29% of the payment. On $6,000 of monthly income, that is $1,739 a month and $5,217 a quarter.

Questions people ask

What rates should I enter for my country?

Use your country's tax authority calculator or last year's return to find your average income tax rate, then add any self-employment or national insurance contributions. When in doubt, set aside a little more; a refund is better than a bill you can't pay.

Does this include VAT or sales tax?

No. If you charge VAT or sales tax, that money is collected on the government's behalf and should be set aside separately, in full, before this calculation.

Is this tax advice?

No. It is a budgeting estimate. Deductions, allowances and thresholds vary by country and personal situation, so confirm your real obligation with an accountant or your tax authority.

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