How Much Should I Really Set Aside for Taxes as a Canadian Freelancer?
For many freelancers and small business owners, there’s a quiet fear that lingers after a good month: the thought of the tax bill that will eventually come due. You work hard for your money, and the last thing you want is the stress and shock of owing thousands of dollars to the CRA that you haven't prepared for.
What if you could eliminate that stress?
The good news is that you can. With a simple, consistent plan, you can face tax season with calm and confidence. This guide will give you a straightforward rule of thumb to help you save for your taxes correctly.
Disclaimer: I am a professional bookkeeper dedicated to helping you organize your finances. However, this post is for informational purposes and should not be considered legal or tax advice. Please consult with a qualified accountant for advice specific to your financial situation.
The Simple Rule of Thumb: The 25-30% Method
The most common and safest recommendation for Canadian freelancers and sole proprietors is to set aside 25% to 30% of every single payment you receive.
Why so much? Because, as a self-employed individual, you're responsible for paying two main things your employer would normally handle for you:
Income Tax: This covers your federal and provincial income taxes.
CPP Contributions (Both Halves!): As a freelancer, you must pay both the employee and the employer portions of the Canada Pension Plan. This is a common surprise for many, as it's double what you would pay as an employee (for 2025, this is 11.9% on your self-employment income up to a certain maximum).
That 25-30% figure is designed to be a safe estimate to cover both of these obligations, ensuring you have more than enough saved.
Your 3-Step Action Plan for Stress-Free Tax Savings
Here is the simple, practical system I recommend to all my clients.
Step 1: Open a Separate "Tax Savings" Bank Account
This is the most critical step. Open a new, no-fee savings account at your bank and name it "Tax Savings." This account is not for business expenses or for personal use. Its only job is to hold the money you owe to the government.
Step 2: Do the Math Immediately
Every single time a client pays you, before you do anything else, calculate your tax savings.
Example: A client pays your $1,000 invoice.
Calculation: $1,000 x 30% = $300.
Step 3: Transfer the Money and Don't Touch It! Immediately transfer that $300 from your main business account into your "Tax Savings" account. This money is no longer yours to spend. By moving it, you create a clear mental and financial separation. Repeat this process for every single payment you receive.
By following this simple system, you transform tax season from a time of panic into a calm, predictable business task. The feeling of seeing the money already sitting there, ready to go, is one of the best forms of peace of mind an entrepreneur can have.
If you're feeling behind or are looking for a professional partner to help implement systems like this in your business, that's where I can help.
Ready to transform your financial stress into confidence? Book a free, no-obligation 15-minute consultation with me today.
