How much tax to set aside when you’re self-employed
What freelancers and sole traders really need to put aside for tax in the UK, US, Canada and Australia, why it differs, and a simple system to avoid a nasty bill.
The hardest part of going freelance often isn’t finding work, it’s the tax bill that arrives months later with nothing withheld. The usual advice is “put aside 25 to 30%”. That’s a fair starting point, but the right figure depends a lot on where you live and how much you earn. Here’s what it actually comes to in four countries.
The short answer
| Where | Profit | Tax to set aside | Share of profit |
|---|---|---|---|
| UK (England) | £39,000 | £6,872 | 18% |
| Australia | A$80,000 | A$15,120 | 19% |
| US (no state income tax) | $75,000 | $15,495 | 21% |
| US (California) | $75,000 | $17,846 | 24% |
| Canada (Ontario) | C$73,000 | C$19,455 | 27% |
Each figure is for a single person with no other income, 2026 rates (2026/27 in the UK, 2026–27 in Australia), using our self-employed tax calculators.
Why the percentages differ
- Canada is highest because the self-employed pay both halves of CPP, 11.9% of most earnings, on top of income tax.
- The US charges 15.3% self-employment tax, but the 20% qualified business income deduction takes a big bite out of income tax.
- The UK charges only 6% Class 4 National Insurance, less than employees’ 8%, and the first £12,570 is tax-free.
- Australia has no separate social security tax for sole traders, and the small business offset knocks up to $1,000 off.
The rate rises as you earn more
All four countries tax higher profits at higher rates, so a flat 25% can leave you short as the business grows. At $250,000 of US profit the bill is about $66,360, or 27%, because the QBI deduction starts phasing out above $201,750 of taxable income. In the UK, profits between £100,000 and £125,140 are taxed at an effective 62% including National Insurance, as the personal allowance is withdrawn. Run the calculator again whenever your income changes.
A simple system that works
- Open a separate savings account just for tax.
- Move your percentage across every time a client pays you, not at the end of the month.
- Pay quarterly if your country asks for it: US estimated payments, Australian PAYG instalments and Canadian instalments.
- Check it twice a year with a calculator, and top up or ease off.
- Anything left after the bill is a bonus, not a reason to save less next year.
The first-year trap
In the UK, your first Self Assessment bill usually comes with a payment on account for the next year, so in January you can owe 150% of a year’s tax at once. In the example above that’s £10,308 on 31 January. Canada and Australia start instalments after your first year with business income, so your first bill is also the biggest surprise. Setting money aside from your very first invoice is the only reliable fix.
Work out your own figure
- US self-employment tax calculator, with state tax and quarterly payments
- UK self-employed tax calculator, with payments on account
- Canada self-employed tax calculator, for every province
- Australia sole trader tax calculator, with the small business offset
Remember that sales taxes such as VAT, GST and HST are separate. If you’re registered, that money belongs to the tax office from the moment a client pays it, so keep it aside too.