Billingz Guides · Taxes
How much should a freelancer set aside for taxes?
Short answer
Set aside a fixed percentage of every payment on the day it arrives, into a place you do not spend from. What that percentage should be varies enormously: income tax alone runs from a flat 10% in Bulgaria and North Macedonia to top rates above 50%in Austria, Belgium and Denmark, and social contributions are often the larger half of the bill. Get your own country’s figure from someone who knows it. After that, the habit matters more than the exact number.
The freelancer tax trap is not the rate. It is the timing. Income arrives now and feels spendable; the tax on it arrives months later, after the money has quietly become a laptop. The fix is structural, not moral.
The rule that works
- Pick your percentage. Deliberately safe for year one - better to release surplus later than to owe.
- Apply it to every payment, the day the money lands. No exceptions, no waiting for month-end.
- Move it somewhere separate - a sub-account, a savings pocket. Out of the balance you look at when deciding what you can afford.
- Treat VAT as never yours. Whatever VAT you charge goes into the separate place immediately, on top of the income-tax percentage.
- Calibrate once a year. After your first full filing, adjust the percentage to reality.
Why the visible balance lies
A bank balance answers one question: how much money is in the account. It says nothing about how much of it is already owed. A freelancer with 8,000 in the account and 3,000 of unset-aside tax does not have 8,000 - and every spending decision made on the visible number is made on wrong information. The set-aside habit makes the visible number tell the truth again.
The percentage is only as good as the figure it is applied to, which is why recorded costs matter here rather than at the end of the year: how to track business expenses.
It is worth knowing what the balance is actually made of, because VAT and contributions are in there alongside the tax on your profit: which taxes apply to you, and which money was never yours.
When it goes wrong anyway
If a tax bill has already caught you short: contact the tax authority early rather than late - payment plans exist in most countries and are granted far more readily before the deadline than after it. Then start the percentage habit on the very next payment. The system works from whatever day you start it.
Common questions
Why do freelancers get caught out by taxes?
Because tax arrives on a different clock than income. Money lands, looks spendable, and gets spent - then the tax bill for it arrives months later, sometimes together with advance payments for the next period. The money was never yours; it only visited your account.
What percentage should I actually use?
It depends on your country, your legal form and your profit, and the spread is wide enough that no single figure travels. Income tax alone is a flat 10% in Bulgaria and North Macedonia, while top rates exceed 50% in Austria, Belgium and Denmark, and the average top rate across European OECD countries sits around 43%. Two cautions on those higher figures: a top rate applies only to the slice of income above a threshold, not to everything you earn, and social contributions sit on top of income tax and are frequently the larger part. Where contributions are capped or sit on a fixed base, the all-in effective rate falls as profit rises rather than climbing. Start with a deliberately safe figure for your own country, calibrate after your first full filing year, and ask an accountant for your exact number.
Where should the set-aside money live?
Anywhere that is not your spending account: a separate sub-account or savings pocket is enough. The point is that your visible balance stops lying to you about what is spendable.
Should I set aside from every payment or once a month?
Every payment, the day it arrives. Per-payment is mechanical and survives busy months; end-of-month batching depends on remembering, and on the money still being there.
What about VAT I collect?
VAT you charge was never your money at all - it is collected on behalf of the tax authority. Separate it immediately and completely, on top of your income-tax set-aside.
Built for this
Billingz tracks what portion of your incoming money should be set aside and shows your money with tax already separated - so the number you see is the number you can actually spend.
See how Billingz handles tax set-asideThis guide is general information, not tax advice. Rates, advance payment schedules, and rules vary by country and legal form. Confirm your exact percentage with a qualified accountant. Reviewed August 2026.