How much tax to set aside when self-employed

What you are setting money aside for

As a self-employed person you usually pay tax on your profit, which is your income minus allowable business expenses, not on everything you invoice. On top of income tax, most countries charge a social security contribution on self-employed profit, and some also charge a sales tax such as VAT or GST once you pass a registration threshold. Your set-aside needs to cover all of it.

Work out your own percentage

1. 1.Estimate your profit for the year: expected income minus expected business costs.
2. 2.Estimate the income tax and social contributions on that profit, using your tax authority's rates or a calculator.
3. 3.Divide the total tax by your expected income. That is the share of each payment to keep back.
4. 4.Round it up a little. Being slightly over is a pleasant surprise; being under is a debt.

If you filed last year, your last return is the best starting point: total tax divided by total income. Recalculate when your income changes a lot, because many countries tax higher profits at higher rates.

Move it as soon as you are paid

Open a separate savings account just for tax, and move your percentage there every time a client pays, before you spend anything. Money you cannot see in your everyday account is much easier to leave alone. If you register for VAT or GST, the tax you collect from clients is not yours either, and belongs in that account too.

When the tax is due

Many countries expect self-employed people to pay during the year, not only once at the end. Where you live decides how:

• ✓United States: self-employed people generally pay estimated tax four times a year with Form 1040-ES, and self-employment tax covers Social Security and Medicare. See the IRS pages on estimated taxes and self-employment tax.
• ✓United Kingdom: sole traders file a Self Assessment return and may make payments on account towards the next year's bill, as GOV.UK explains. Profits above a threshold also pay Class 4 National Insurance.
• ✓Canada: self-employed people pay both portions of CPP contributions and may need to pay tax by instalments. See the CRA guide to instalments.
• ✓Australia: sole traders may be placed in pay as you go (PAYG) instalments, and the Medicare levy is added to income tax. See the ATO page on PAYG instalments.

Elsewhere, search your national tax authority for "self-employed" or "estimated tax"; most publish a short guide.

Keep records as you go

Every allowable expense you record lowers your profit, and with it your tax. Log income and expenses weekly, keep receipts, and note business mileage and working-from-home costs if your country allows them. A record kept as you go is far more accurate than one rebuilt from bank statements a year later.

Your first year

The first year is the riskiest, because there is no earlier return to go on and, in some countries, your first bill can include an advance towards the following year. Set aside generously, and consider one meeting with an accountant before your first return. It usually costs far less than a mistake.

From the Stelaah Store

• ✓Multi-Currency Freelancer Tax Tracker 2027. An Excel and Google Sheets tax tracker for freelancers in any country, with income in 21 currencies converted to your home currency, VAT or GST and quarterly tax set-aside.
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• ✓UK Sole Trader Tax Tracker 2026/27. An Excel and Google Sheets tax tracker for UK sole traders for 2026/27, built for Making Tax Digital quarters, with Class 4 National Insurance, mileage and use of home.
• ✓Canada Self-Employed Tax Tracker 2026. An Excel and Google Sheets tax tracker for self-employed Canadians for the 2026 tax year, with T2125 categories, CPP, GST/HST, instalments, a vehicle logbook and business use of home.
• ✓Australia Sole Trader Tax Tracker 2026-27. An Excel and Google Sheets tax tracker for Australian sole traders for the 2026-27 financial year, with GST and BAS, a car log, working from home and a tax summary.
• ✓Jamaica Self-Employed Tax and GCT Tracker 2027. An Excel and Google Sheets tax and GCT tracker for self-employed people in Jamaica for 2027, with NIS, education tax, NHT, income tax, S04A quarterly tax and the S04 summary.