How much should a Canadian freelancer set aside for taxes?

A common starting point is 25–30% of every payment received. This covers federal and provincial income tax, plus CPP contributions (which self-employed people pay at double the employee rate). At lower incomes ($30,000–$50,000), 25% is often sufficient. At higher incomes ($80,000+), 30–35% is more appropriate, especially in high-tax provinces like Ontario, BC, or Quebec.

Do Canadian freelancers pay CPP on self-employment income?

Yes. Self-employed Canadians pay both the employee and employer portions of CPP, totalling 11.9% of net self-employment income in 2025 (on income between the $3,500 basic exemption and the year's maximum pensionable earnings of approximately $73,200). CPP is calculated on Schedule 8 and included in your T1 balance owing — it is not a separate payment.

Does GST/HST count toward the 30% I set aside?

GST/HST should be tracked separately, not included in your 30% income tax reserve. GST/HST belongs to CRA from the moment you collect it — it is not your income. Keep all collected GST/HST in a separate account or clearly tracked, and remit it when your return is due. If you mix GST/HST with your income tax reserve, you risk accidentally spending it.

When do I have to pay income tax as a self-employed Canadian?

Your T1 balance owing is due April 30, but if you or your spouse are self-employed, CRA allows until June 15 to file the return. The payment is still due April 30 even with the extended filing deadline. If your prior-year balance owing exceeded $3,000, CRA also requires quarterly income tax instalments throughout the year (March 15, June 15, September 15, December 15).

What expenses reduce the amount of tax I owe?

Business expenses deducted on T2125 reduce your net self-employment income, which reduces both income tax and CPP contributions. Common deductions include home office expenses, vehicle expenses (business portion), software subscriptions, professional development, phone and internet (business portion), and subcontractor costs. The lower your net income, the lower your tax reserve needs to be.

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How Much to Set Aside for Taxes as a Canadian Freelancer

You invoiced $5,000 last month. How much of that do you actually keep? The "set aside 30%" rule is a good starting point — but where does the 30% actually go, and is it the right number for your income level?

Quick Answer

Set aside 25–30% of every payment for income tax and CPP contributions. Track GST/HST separately — it is not your income and should not be mixed with your tax reserve. At $40,000 net income in Ontario, your combined income tax + CPP is roughly 26–28%. At $80,000, it climbs to 35–38%. The 30% rule covers most people reasonably well.

The three things you owe as a self-employed Canadian

1. Income tax (federal + provincial)

Calculated on your net business income (revenue minus expenses). Federal rates start at 15% and increase with income. Provincial rates vary — Ontario adds 5.05–13.16%, Alberta adds a flat 10%, Quebec adds 14–25.75%. Both layers apply.

2. CPP contributions

As a sole proprietor, you pay both the employee and employer portions of CPP — 11.9% combined in 2025. This applies to net self-employment income between $3,500 and ~$73,200. On $50,000 net income, CPP is roughly $5,540. This is a significant cost that surprises many first-time freelancers.

3. GST/HST (track separately)

Once registered, you collect GST/HST from clients and remit it to CRA. This money is never yours — hold it separately and do not include it in your income or your tax reserve calculation. It is a pass-through.

Real numbers by income level (Ontario, 2025)

These figures are approximate and use Ontario rates. Provincial rates vary — Alberta will be lower; Quebec, BC, and NS higher. All figures assume no deductions beyond the basic personal amount.

Net income	Income tax	CPP	Total	Effective rate
$30,000	~$2,500	~$3,150	~$5,650	~19%
$50,000	~$8,200	~$5,540	~$13,740	~27%
$75,000	~$16,800	~$8,300	~$25,100	~33%
$100,000	~$26,200	~$8,300	~$34,500	~35%

Approximate figures only. Assumes Ontario provincial rates, basic personal amounts, and no other deductions. CPP caps out at maximum pensionable earnings (~$73,200 for 2025). Always run your actual numbers or consult a tax professional.

Your deductions lower the number

The table above assumes no business deductions beyond the basic personal amount. In practice, most freelancers have deductions that reduce net income:

Home office expenses (see the home office deduction guide)
Vehicle expenses (business portion)
Software, tools, and subscriptions
Professional development and courses
Phone and internet (business portion)
Subcontractors and professional fees

Each dollar of deductions reduces your net income by one dollar, which reduces both income tax and CPP. A freelancer earning $75,000 gross with $15,000 in expenses has $60,000 in net income — dropping their effective rate significantly.

GST/HST — keep it completely separate

If you are registered for GST/HST, the tax you collect from clients is not your income. Do not mix it into your 30% reserve. The clearest approach:

Open a dedicated savings account labelled "Taxes"
Every time a client pays an invoice, move the GST/HST portion to that account immediately
Also move your income tax reserve (25–30% of the pre-tax amount) to the same account or a second savings account
When your GST/HST return is due, the remittance amount is already sitting in the account

When CRA expects the money

Income tax balance owing is due April 30. GST/HST remittance is due based on your filing frequency — annually (3 months after fiscal year end, or April 30 for December 31 year ends), quarterly, or monthly. If your prior-year income tax or GST/HST balance exceeded $3,000, CRA also requires quarterly instalment payments throughout the year.

See the GST/HST filing frequency guide and the income tax instalments guide for exact dates.

Get Started Freelancer Expense Deductions

This article is for informational purposes only and does not constitute tax advice. Tax rates change annually — always verify current rates with CRA or a qualified tax professional.