How it works
Freelancers usually pay tax on profit, not on gross income. Business expenses — software, equipment, travel, a home office — reduce the income that gets taxed, so tracking them is the single biggest lever on your tax bill.
The “effective tax rate” is a single blended rate you enter yourself. It is an estimate: your real rate depends on your country's tax bands, deductions, and whether you also pay self-employment or social charges. Use your last year's actual rate, or your accountant's estimate.
Formula
Taxable income = annual income − business expenses. Estimated tax = taxable income × effective tax rate.
What each input means
- Annual freelance income: Everything you earned from freelance work in the year, before expenses.
- Business expenses: Ordinary business costs: software, equipment, internet, travel, home office. Only count costs that are genuinely for the business.
- Effective tax rate: Your estimated effective tax rate as a percentage. If you paid $13,600 on $68,000 of taxable income last year, your rate was 20%.
Worked example: $80,000 income, $12,000 expenses, 20% rate
- Annual income: $80,000
- Business expenses: $12,000
- Taxable income: $80,000 − $12,000 = $68,000
- Estimated tax: $68,000 × 20% = $13,600
- You keep: $80,000 − $13,600 = $66,400 before any other charges.
Frequently asked questions
What counts as a business expense?
Costs that are ordinary and necessary for your work: software subscriptions, a laptop, internet, phone, travel to clients, and a home-office share of rent and utilities. Keep receipts — the exact rules depend on your country.
Why is the result only an estimate?
Real tax uses bands, allowances, and separate charges (like self-employment tax) that a single rate cannot capture. This calculator gives a planning number; your tax return is the final word.
Should I set money aside for tax?
Yes. A common rule is to set aside your effective rate — for example 20% — of every payment you receive, in a separate account, so the tax bill never surprises you.
Does this include VAT or sales tax?
No. This estimates income tax only. If you charge VAT or GST, that is collected on top of your fees and passed to the tax authority; it is not part of this calculation.