Set-aside rate at other profit levels
Using the country and settings you chose above:
| Yearly profit | Estimated tax | Set aside |
|---|---|---|
| Enter your numbers above to see this table. | ||
The rate rises with profit, because more of it falls into higher tax bands. Re-check it when your income changes a lot.
How to use this calculator
- Choose your country and enter the profit you expect this year. If you're not sure, use last year's profit or your best guess, and update it as the year goes on.
- Fill in the extra boxes for your country, such as filing status in the US or where you live in the UK.
- Enter a payment you've just received to see how much of it to move into a separate tax savings account.
- Do it every time you're paid. When the tax is due, the money is already waiting.
How it's calculated
- US: federal income tax (standard deduction and the QBI deduction) plus self-employment tax and Additional Medicare Tax, and your own flat state estimate. The same method as our freelancer take-home pay calculator.
- UK: Income Tax and Class 4 National Insurance, as in our self-employed tax calculator.
- Canada: federal tax and both halves of CPP (with CPP2), plus your provincial estimate, as in our self-employed tax calculator.
- Australia: income tax after the low income and small business offsets, plus the full 2% Medicare levy, as in our sole trader tax calculator.
Worked examples
Each person has the profit shown and no other income. Each has just been paid 2,000 in their own currency.
| Freelancer | Yearly profit | Estimated tax | Set aside | From a 2,000 payment |
|---|---|---|---|---|
| US, single, no state tax | $60,000 | $12,037.20 | 20.1% | $401.24 |
| UK, England | £40,000 | £7,131.80 | 17.8% | £356.59 |
| Canada, 5% provincial estimate | $60,000 | $14,682.59 | 24.5% | $489.42 |
| Australia, sole trader | $80,000 | $15,120.00 | 18.9% | $378.00 |
The UK freelancer, for example, pays £5,486 Income Tax and £1,645.80 Class 4 National Insurance on £40,000 of profit: £7,131.80, or 17.8%. Moving £356.59 of every £2,000 into a separate account covers it.
Why a separate account helps
No one takes tax out of a freelancer's pay, so the full amount lands in your account and it's easy to spend it. Then the bill arrives months later, all at once. Moving the set-aside share out on the day you're paid keeps the two apart. Many banks let you open a separate savings account for this.
When the tax is due, pay it from that account:
- US: quarterly estimated tax payments. Our quarterly tax calculator shows the amounts and dates.
- UK: Self Assessment by 31 January, and payments on account. See our payments on account calculator.
- Canada: balance owing by April 30, and instalments if you need them. See our instalments calculator.
- Australia: when you lodge your return, and PAYG instalments if the ATO asks you to pay them.
What this calculator doesn't cover
- Other income, such as a salary from a job, savings interest or rent. If you have a job too, your rate on freelance profit can be higher than shown.
- Credits, allowances and deductions beyond the ones listed above, and student loan or HELP repayments.
- Exact US state and Canadian provincial tax. Both are your own flat estimate.
- Sales tax, VAT, GST or HST you charge clients. Keep that separate as well.
- Australia's reduced Medicare levy for low incomes: the full 2% is used, so on a low income the estimate may be a little high.
Frequently asked questions
Is there a standard percentage freelancers should save?
No single percentage is right for everyone. It depends on your country, your profit and your situation, which is why this calculator works it out from the official tax rates. In the examples above it ranges from about 18% to 25%.
Should I set aside a percentage of my income or my profit?
Tax is charged on profit, so the rate here is worked out on profit. If your expenses are small, applying it to each payment is close enough. If they're large, applying it to each payment sets aside a little more than you need, which is the safer mistake.
What if I set aside too much?
Then you have money left after paying your tax bill. Many freelancers keep it as a start on next year's tax or an emergency fund. Our emergency fund calculator shows how much cash to keep for quiet months.
My income changes a lot. Which profit should I enter?
Enter your best estimate for the whole year, then update it every few months. Our income smoothing calculator helps turn uneven income into a steady monthly amount.
Is this the tax I'll actually pay?
It's an estimate based on the rules above and the official rates for this tax year. Your real bill depends on everything on your return. An accountant can give you an exact figure.
Sources: the official figures behind each country's tax come from the IRS, GOV.UK, the CRA and the ATO. Each country calculator linked above lists its full sources.