What percentage should a freelancer save for taxes?

A common rule of thumb is 25–30% of income in many countries, but it varies widely. In the Gulf it may be close to zero for income tax, while parts of Europe need more. Start cautious and adjust after your first year's return.

Do freelancers in Saudi Arabia pay income tax?

Saudi nationals and GCC citizens generally do not pay personal income tax on freelance earnings, but VAT registration and other obligations may apply. Check the current rules with a local adviser.

Should I set aside tax from gross or net income?

Setting it aside from every payment received (gross) is simpler and errs on the safe side. Any excess becomes savings once your actual bill is known.

How much to set aside for tax as a freelancer

The tax bill is rarely the problem. The problem is spending the money before the bill arrives. A fixed percentage moved on the day you are paid solves that almost completely.

8 min read · Last updated 28 September 2026

Why employees never think about this

An employer deducts tax before pay reaches the employee's account, so the money never feels like theirs. A freelancer receives the full invoice amount, and it all looks spendable. Months later a single large bill arrives. The fix is to recreate the employer's deduction yourself, every time a payment lands.

Pick a set-aside percentage

Your percentage should cover income tax, any social or self-employment contributions, and a small safety margin. It applies to profit, but setting it aside from every payment received is simpler and slightly cautious, which is what you want. Typical starting points: 25–30% for a US sole proprietor, 20–30% for a UK sole trader depending on income band, and 25–40% across much of the EU.

In Saudi Arabia and most Gulf states there is no personal income tax on freelance earnings, so the income-tax set-aside may be zero. That does not mean nothing needs to be held back: VAT, local licence fees and zakat obligations may apply depending on your situation. Always confirm with a local adviser.

These are starting points, not tax advice. Your accountant can give you a figure based on your actual income and deductions.

VAT and sales tax are not your money

If you are registered for VAT — for example at 15% in Saudi Arabia or 20% in the UK — the VAT on each invoice belongs to the tax authority from the moment the client pays it. Move the entire VAT amount aside separately from your income-tax reserve. Treating VAT as revenue is one of the fastest ways for a small business to get into trouble.

The separate-account method

Open a second account used only for tax. A savings account is ideal.
When any client payment arrives, move your percentage (and any VAT) the same day.
Never spend from it for anything else, even temporarily.
When the tax bill arrives, pay it from that account. Anything left over is a bonus.

Because the transfer happens on every payment, it works just as well in a big month as in a small one, and irregular income stops being a tax problem.

Make the rest predictable too

Once tax is handled, the next step is paying yourself a steady salary from the rest. The Feast & Famine Salary Maker works out a fixed monthly amount you can transfer to yourself, and the cushion needed to keep paying it through quiet months.

Frequently asked questions

What percentage should a freelancer save for taxes?: A common rule of thumb is 25–30% of income in many countries, but it varies widely. In the Gulf it may be close to zero for income tax, while parts of Europe need more. Start cautious and adjust after your first year's return.
Do freelancers in Saudi Arabia pay income tax?: Saudi nationals and GCC citizens generally do not pay personal income tax on freelance earnings, but VAT registration and other obligations may apply. Check the current rules with a local adviser.
Should I set aside tax from gross or net income?: Setting it aside from every payment received (gross) is simpler and errs on the safe side. Any excess becomes savings once your actual bill is known.