How much should freelancers set aside for taxes?
The freelance tax trap is simple: no one withholds tax from your pay, so unless you set it aside yourself, the bill arrives when the money's already gone. A little discipline avoids the whole problem.
Skip the math — the free freelance tax set aside calculator runs this from your own figures.
Open the free calculator →Why freelancers get caught out
As an employee, tax is quietly withheld from every paycheck before you see it. As a freelancer, the full payment lands in your account — and it's entirely on you to hold back the tax portion until it's due.
It's easy to treat all of it as income and spend accordingly, then face a large bill with nothing set aside. The fix is to move the tax portion out of reach the moment you're paid.
A rough set-aside percentage
A common guideline is to set aside somewhere around 25% to 35% of your net self-employed income for taxes. The right figure depends on your income level, where you live, and whether you owe self-employment or payroll taxes on top of income tax.
Higher earners and those in higher-tax locations should lean toward the top of that range or beyond. When unsure, err on the high side — a refund is far more pleasant than a shortfall.
Set aside on net, not gross
Tax is owed on your profit, not your revenue — so calculate the set-aside on your net income after deductible business expenses, not your total invoices. Overlooking this makes you set aside more than needed (not the worst problem) or, if you forget expenses reduce the bill, misjudge your true rate.
Keeping good expense records lowers your taxable income, and therefore the amount you need to hold back.
Pay quarterly to avoid penalties
Many tax systems require the self-employed to pay estimated taxes during the year — often quarterly — rather than in one annual lump. Underpaying along the way can trigger penalties even if you settle up at year-end.
Dividing your annual set-aside into quarterly payments keeps you current and spreads the pain. Note the due dates that apply where you file and treat them like any other bill.
Automate it
The most reliable approach is to move a fixed percentage of every payment into a separate 'tax' account the day it arrives, and pay your estimated taxes from there. You never see that money as spendable, so you never accidentally spend it.
The free calculator below shows your annual and quarterly set-aside from your income and rate, and the full tracker logs income and set-aside month by month so you always know where you stand.
Questions
Should I set aside for taxes before or after business expenses?
After. You owe tax on your profit — income minus deductible business expenses — not on your gross revenue. So calculate your set-aside on net income. Keeping thorough expense records genuinely lowers your tax bill, and therefore the amount you need to hold back. Just make sure the expenses are legitimate and documented; guessing either way can leave you over- or under-prepared.
What happens if I don't pay quarterly estimated taxes?
In systems that require them, skipping or underpaying quarterly estimates can result in penalties and interest, even if you pay the full amount at year-end. The tax authority effectively expects to be paid as you earn. Paying reasonable quarterly estimates — which this tool helps you size — keeps you compliant and avoids surprise penalties. Check the specific thresholds and due dates where you file.