How to Set Your Freelance Rate in Canada (After Taxes)
Most new Canadian freelancers underprice themselves. Not because they don't know their worth — but because they forget to account for everything that comes off their revenue before they actually get paid. Income tax, CPP contributions, and potentially GST all reduce what you keep. This guide shows you the real math so you can set a rate that actually works.
The core problem
As an employee, your employer handled deductions, CPP matching, and EI. As a freelancer you're responsible for all of it — every dollar a client pays feels like income but a significant portion belongs to CRA.
If you set your rate based on your desired take-home without accounting for taxes and CPP, you'll end up working a portion of every year for free.
What comes off your freelance revenue
Three things reduce your take-home pay as a Canadian freelancer:
1. Income tax
Federal and provincial income tax on net business income. Federal rates in 2025 range from 14.5% on the first ~$57,375 up to 33% on income over $253,414. Provincial rates vary. Combined federal and provincial for a freelancer earning $80,000 net in Ontario puts them in the mid-30s percentage range overall.
2. Canada Pension Plan (CPP)
As a sole proprietor you pay both employee and employer portions. The 2025 combined self-employed CPP rate is 11.9% on net income between the $3,500 basic exemption and $71,300 maximum pensionable earnings — maximum contribution $8,068.20. On earnings between $71,300 and $81,200, an additional CPP2 rate of 8% applies. Good news: you can deduct the employer half from your taxable income.
3. GST/HST (sort of)
Not your income — it belongs to CRA the moment you collect it. Never factors into your take-home calculation. But it affects cash flow: you collect it, hold it, and remit it periodically. Keep GST/HST in a separate account.
The general rule
Set aside 25–30% of net freelance income for income tax and CPP. Some sources recommend up to 40% for higher brackets or higher-tax provinces. Safest approach: 30% of every payment into a dedicated tax savings account.
Working backwards from take-home pay
Here's a simplified way to calculate the rate you need. Start with the annual take-home income you want. Then work backwards:
Step 1: Add 30% to your desired take-home
This estimates the gross income needed before taxes and CPP. Example: want $60,000 take-home? $60,000 ÷ 0.70 = approximately $85,700 gross freelance income needed.
Step 2: Add your business expenses back
If you plan to deduct $5,000 in expenses, those reduce your taxable income and therefore your tax bill.
Step 3: Divide by billable hours
Most freelancers realistically bill 60–70% of total working hours. 40 hrs/week × 48 weeks × 65% = roughly 1,248 billable hours. $85,700 ÷ 1,248 hours = approximately $69/hour. That's the rate needed to take home $60,000 after taxes and CPP in this example.
GST doesn't change your rate — but you need to think about it
Once GST-registered, you add GST/HST on top of your rate. $69/hour in Ontario becomes $78/hour on the invoice (13% HST). The client pays $78, you keep $69, and you remit $9 to CRA. GST is a pass-through — your rate doesn't change.
Read more: Do I charge GST on my freelance invoices?
Don't forget business expenses reduce your tax
Deductible expenses lower your taxable income, which lowers your tax and CPP. Earning $85,700 and claiming $10,000 in expenses means you pay tax on $75,700. At a combined marginal rate of 35%, that saves roughly $3,500. Every receipt is money back in your pocket.
Tax instalments
If your tax owing exceeds $3,000 in two consecutive years, CRA requires quarterly instalment payments. These are due March 15, June 15, September 15, and December 15. If you're setting aside 30% throughout the year, these shouldn't catch you off guard.
NorthOS shows your Safe to Spend amount
Your NorthOS dashboard calculates your Safe to Spend — what's left after NorthOS sets aside a reserve for income tax and GST/HST. So you always know what you can actually spend, not just what came in.
Try NorthOS freeThis article uses illustrative examples based on 2025 CRA rates. Tax rates and CPP contribution limits change annually. This is for informational purposes only and does not constitute tax advice — consult a qualified tax professional for advice specific to your situation.