How Much Should a Freelancer Set Aside for Tax?
A simple rule, what actually changes your number, and a free way to work out your exact tax set-aside in a minute.
You just went freelance, a client pays you, and a small voice asks: how much of this is actually mine to keep? It is one of the first things that makes self-employment feel scary, and one of the easiest to fix once you have a number to work with.
So here is a number, then the reasoning behind it, then a way to get your own exact figure in about a minute.
Start with 20 to 30 percent
For most freelancers and sole traders, holding back 20 to 30 percent of every payment is a safe default. The day a client pays you, move that slice into a separate account and forget it exists. When the tax bill turns up, you pay it from that pot and carry on, instead of staring at your bank balance in a panic.
If you are just starting out and not earning much, 20 percent is usually more than enough. As your income grows into higher tax bands, nudge it toward 30. And if you earn well, or you owe self-employment or social-security style contributions on top of income tax, you may need to hold back more than that.
That range is deliberately blunt. It has to work for a student doing weekend design jobs and for someone clearing six figures. Your own number comes down to a few specific things.
What moves your number up or down
The big one is how much you earn. Most countries tax income in bands: the first slice is tax free or taxed lightly, and each slice above it gets taxed harder. So a modest earner sets aside a far smaller percentage than someone in a top band. The bit that surprises people is that your average rate is almost always lower than the headline rate of your top band. Being "in the 40 percent bracket" does not mean 40 percent of everything you make.
Then there are your expenses, which quietly do a lot of work. You pay tax on profit, not on everything that lands in your account. Income minus your allowable costs (software, gear, travel, a slice of your home office) is the figure you actually get taxed on. Every real expense you write down shrinks that figure, which shrinks what you owe. Tracking expenses is not boring admin. It is money you get to keep.
Last is where you live. Bands, rates and extra contributions change from country to country, sometimes from region to region. A flat 25 percent rule might be spot on in one place and badly off in another.
Get your actual number in a minute
A rule of thumb is fine until you want to stop guessing. The quickest way to a real figure is a calculator that lets you plug in your own country's bands.
We made a free one for exactly this moment. Type in your income and your expenses, set your tax bands, and it shows your profit and the amount to put aside straight away. No signup, any currency.
You can try it here: rootsandreceipts.com
A quick example
Say you bill 42,000 in a year and have 9,000 of expenses.
Your profit is 33,000, not 42,000. That gap matters, because the 33,000 is what you get taxed on. Use some simple bands: nothing on the first 12,000, then 20 percent above that. The tax works out at 20 percent of 21,000, which is 4,200. And 4,200 against 42,000 of income is about 10 percent.
So a flat "save 25 percent" would have parked more than double what this person actually owed. Not a disaster as a safety net, but that spare cash could be covering rent or sitting in savings instead of doing nothing. Your bands will look different from these, which is the whole reason to run your own.
Where to keep it
A few habits make this painless. Open a separate savings account just for tax, so the money is out of sight and out of reach. Move it the day you get paid, not at the end of the month, because anything sitting in your main account has a way of vanishing. And if your country collects tax in instalments through the year, save toward those dates too, so none of them catch you off guard.
The mistakes that actually cost you
The most common one is spending the tax money because it is right there in your account. It was never really yours. Treat that pot as untouchable and the bill stops being frightening.
The next is forgetting expenses. Every cost you do not record is money you pay tax on without having kept it. Log everything and hang on to the receipts.
After that, guessing. A guess that comes in too low turns into a horrible January. Run your real numbers a few times a year, especially whenever your income changes.
And the quiet one underneath all of them: leaving everything until tax season. The dread comes from cramming a year of admin into one weekend. Five minutes a month and almost all of it disappears.
Make it run itself
Setting money aside is simple to understand and surprisingly easy to drop. What fixes that is a system you will genuinely keep up with.
That is the other thing we make. Alongside the free calculator, we build simple finance trackers for freelancers and small businesses: one spreadsheet with a live dashboard, an invoice tracker that turns overdue payments red, and a tax estimator you set to your own country. You log as you go and it handles the maths. It runs in Excel, Google Sheets or Numbers, you pay once, and there is a version made for all sorts of solo businesses.
You can see them over at Roots & Receipts.
This is a planning guide, not tax advice. Rules vary by country and change over time, so check your bands and any contributions with your accountant or local tax office.
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