Tax Budgeting as a Freelancer: The Questions Worth Asking

Most freelancers think about taxes once a year. The ones who avoid nasty surprises think about them every time they invoice.

How much should be set aside from each payment?

For most Canadian freelancers earning between $50,000 and $90,000 annually, setting aside 28% to 32% of each invoice covers federal and provincial income tax plus CPP contributions. The exact number depends on your province and deductions, but starting at 30% is a reasonable default while you work out your actual rate with an accountant.

Where should that money actually go?

A separate savings account, not your operating account. The moment a client payment lands, transfer the tax portion immediately. Leaving it mixed with spending money means it tends to disappear into expenses before tax season arrives.

What is the simplest way to monitor this through the year?

Keep a running total in a spreadsheet: gross income invoiced, tax set aside, and cumulative balance in the tax account. Check it monthly. If the balance is falling behind the 30% target, you know before it becomes a crisis.

What about quarterly instalments?

If you owed more than $3,000 in taxes last year, the CRA expects quarterly instalment payments. Missing these results in interest charges. Budget monitoring here means treating instalment due dates the same way you treat client deadlines, with a calendar reminder at least two weeks out.