How Much Should Freelancers Set Aside for Taxes?

This is not tax advice. Nothing on this page tells you what percentage to use, what counts as deductible, or what you owe — that depends on your country, state or province, income level, business structure, and circumstances a spreadsheet can't see. Talk to a licensed accountant or tax preparer for your actual number. What follows is the system freelancers use to make sure that whatever number they're told, the cash is sitting there ready when it's due.

Why freelancers get caught out

A salaried job withholds tax before the money ever reaches your account. You never see it, so you never miss it. Freelance income arrives the opposite way: gross, in full, into an account you use for groceries and rent. Nothing about the deposit tells you that a slice of it isn't really yours yet.

That gap — between money that has arrived and money that has actually been earned free and clear — is where freelancers get into trouble. Not because they spent recklessly, but because nothing marked the boundary. The fix isn't willpower. It's making the boundary automatic.

The set-aside habit, in one sentence

Every time a payment lands, immediately move a percentage of it into an account you don't touch for anything else. That's the whole system. Everything below is detail on how to make that one sentence actually hold up over a full year of irregular income.

Do it per payment, not per month

It's tempting to treat this as a monthly chore — look at what came in, do some rough math, transfer a lump sum. In practice that rarely survives contact with a busy month. The invoice you meant to account for gets forgotten, the "rough math" quietly becomes optimistic, and by the time you notice, three payments have already been spent as if they were fully yours.

Doing it per payment removes the judgment call. The moment money arrives, the transfer happens — same day, before it sits in your spending account long enough to feel available. If your income is irregular, this matters even more: a single large payment in a slow month is exactly the one you're most tempted to treat as a cushion instead of partly-someone-else's-money.

Keep a monthly review as a backstop, not the main event. Once a month, glance down your payment log and confirm nothing slipped through — a client who paid by a method you don't check as often, a reimbursement you mistakenly treated as income. The per-payment habit does the heavy lifting; the monthly review just catches what it missed.

Use a genuinely separate account

The account matters as much as the percentage. Money that lives in the same account as your rent and groceries is, psychologically, spendable — it shows up in the same balance you check before deciding whether you can afford something. Move the set-aside amount somewhere else entirely, ideally an account that takes an extra step to transfer out of.

Three properties are worth having: it's a different bank or a clearly separate account so the balance doesn't blend into your everyday number, it's not linked to a debit card you'd reach for by habit, and it's named something that reminds you what it's for — "Taxes," not "Savings 2." None of that is about interest rates or account features. It's about making the money boring and slightly inconvenient, on purpose.

Picking a percentage — and why this page won't give you one

The right percentage depends on things a generic guide has no way to know: your local tax brackets, whether you have other income, whether your business structure changes what you owe, and whether your jurisdiction layers a separate self-employment or social-insurance style contribution on top of ordinary income tax. Any single number offered here would be wrong for a meaningful share of readers, so it isn't offered.

What is safe to say: pick a percentage — any reasoned starting point — set it aside consistently, and get a licensed accountant or tax preparer to confirm or correct it once you have real numbers to show them. It is far easier to adjust a percentage that's slightly too high or too low than to reconstruct a year of spent tax money from memory. If you're unsure, err conservative for your first year and revisit once you've filed once and know your actual position.

The quarterly rhythm

Setting money aside and paying your tax authority are two different actions, and it's easy to blur them into one mental task. They aren't. The set-aside account is where the cash waits; actually sending it in happens on whatever schedule your local tax authority requires — which in many places means several payments spread across the year rather than a single annual bill.

Treat those dates as fixed appointments, not "whenever I get to it." Put them in a calendar the moment you know them, and check your local tax authority's own guidance for the exact schedule and amounts — that detail is specific to your situation in a way this page can't be. The set-aside account's job is simply to make sure that when each appointment arrives, the money is already there and you're not scrambling to free it up out of your spending account at the worst possible time.

Common ways the habit breaks down

• Treating the balance as a cushion. A healthy-looking number in the tax account isn't a sign you can relax the percentage or dip into it for a slow month. It's already spoken for.
• Waiting for tax season to figure it out. The habit only works because it runs continuously, not retroactively, after the spending has already happened.
• Forgetting less obvious income. A padded reimbursement, a barter arrangement, a one-off fee paid outside your usual invoicing — anything that counts as income needs the same percentage applied.
• Never revisiting the percentage. A number chosen in your first month freelancing may be badly wrong once your income changes. Review it at least once a year, ideally with an accountant.
• Splitting the habit across too many places. Notes app, bank app, memory — something falls through. One log, one account, one rule.

Building it into a spreadsheet

The mechanics are simple enough to build yourself: a log with a date, client, and gross amount column, then two formula columns that multiply the gross amount by whatever percentage or percentages you've decided on, and a running total so you always know what should currently be sitting in the tax account. Add a monthly rollup if you want to see the picture over time rather than payment by payment.

If you'd rather not build that from scratch, the free Tax Set-Aside Calculator runs the same math for a single payment or a quick estimate, and the Freelance Rate Calculator is worth running alongside it — if your set-aside percentage is eating more of your income than you expected, that's a sign your rate needs to account for it, not that the percentage is wrong.