How much to set aside for taxes as a freelancer

The most common financial mistake freelancers make in year one isn’t failing to invoice. It’s spending the invoice.

When you’re employed, the gross/net distinction happens invisibly. The money that lands in your account is yours. When you’re freelancing, the money that lands in your account includes a portion that belongs to the state. The bill arrives later.

“Later” is what makes it dangerous. You invoice in Q1, receive payment in Q2, get the tax bill in Q4 or Q1 the following year. By then, the money is gone.

The number

For most solo freelancers in Western Europe, 30% of gross revenue is a safe provision.

Income tax typically runs 20 to 30% at mid-range income levels. Social contributions add another 10 to 20% depending on country and structure. The exact split varies, but the 30% rule covers most situations without getting into per-country complexity.

UK freelancers: National Insurance plus income tax runs around 25 to 30% up to the higher rate threshold. France micro-entrepreneur: the flat rate sits around 22%, but above the VAT threshold you handle TVA separately. Germany: budget closer to 35 to 40% once health insurance contributions are included.

When in doubt, 30% is the floor. If your accountant tells you the effective rate is lower, the difference stays in the buffer and becomes your cash reserve.

Why invoiced, not received

The tax liability attaches to the work you’ve done — not when the client pays.

If you provision based on received payments, a client who pays 90 days late creates a temporary impression that you owe less. Then the bill arrives and the money isn’t there.

Provision 30% on the day you send the invoice, before the money arrives.

The mechanics

Open a separate savings account. Every time you send an invoice, transfer 30% of the net amount into that account. Same day, or at worst same week.

Don’t categorise it as savings. Don’t include it in runway calculations. It’s not yours.

When the tax bill arrives — quarterly advance payments or an annual bill depending on your country — pay it from that account. Whatever surplus remains is your actual buffer — separate from the cash reserve for dry months, which is built differently and for a different purpose. After a few years, it’s typically two to four months of tax provision sitting idle. That’s fine. It’s insurance.

Variable income makes flat transfers useless

A fixed monthly transfer doesn’t scale. A month of €2,000 in invoices and a month of €10,000 in invoices need different provisions.

Taking 30% of each invoice solves this automatically. The provision scales with the work. No separate calculation needed.

Tracking total invoiced revenue per month is straightforward if your calendar events are tagged by client and billing status. The total at the end of any period is visible without a spreadsheet.

The rate connection

Tax is one of the largest line items in the real cost of freelancing — typically the largest. Rate calculations that skip it produce freelancers who charge €80/hour and effectively earn €48 after tax and overhead.

If you haven’t calculated your real hourly rate yet, the tax provision is the main input most people miss. Your required rate is the one that leaves your target net income after provisioning 30% for tax and covering everything else.

The same account discipline applies to income management generally: money arrives in the business account, a fixed percentage gets earmarked before you count it as available, the rest is yours. How to make that system work across a full year is covered in managing irregular freelance income.

Timescanner shows your total invoiced revenue per client and per period from your calendar events. Run the provision calculation at any point in the month — no spreadsheet needed. Works with any iCal-compatible calendar.