Amount to set aside from each invoice for tax

Why a Per-Invoice Reserve Works

Freelancers without payroll withholding withholding receive gross invoices and owe tax months later. A per-invoice reserve moves the liability to the moment income arrives, avoiding end-of-year tax bill shocks. The reserve rate should reflect both income tax and self-employment or payroll tax contributions in the relevant jurisdiction.

Choosing a Reserve Rate

A 25-30% reserve covers most basic-rate freelancers, and once self-employment taxes are included. Higher earners crossing into higher brackets may need 35-40%. The calculator treats reserve rate as an input rather than a default so the number can reflect current brackets, VAT/GST registration, and any region-specific levies.

Where to Keep the Reserve

A separate high-interest savings or money market account earns interest during the holding period while keeping the funds out of reach for day-to-day spending. Many freelancers transfer the reserve the same day an invoice is paid to remove discretion from the process.

Quick example

With invoice amount of 2,000 and reserve rate of 30, the result is 600.00. Change any figure and watch the output shift — it's often more useful to see the pattern than to memorise the formula.

Which inputs matter most

You enter Invoice Amount and Reserve Rate. Not every input has equal weight. Flip one at a time toward extreme values to feel which ones move the needle most for your situation.

What's happening under the hood

Reserve equals invoice amount multiplied by reserve rate percent. Net equals invoice minus reserve. Results are estimates for illustration purposes only. The formula is listed in full below. If the number looks off, you can retrace the calculation by hand — that's the point of showing the working.

Using this in discovery calls

Knowing the number behind your rate gives you confidence in quoting it. Clients can sense rate doubt; they can also sense rate certainty. This tool helps build the latter.

What this doesn't capture

Freelance income is lumpy. The calculation assumes steady work; reality includes dry spells, delayed invoices, and client churn. Plan against a pessimistic version of the result, not the central case.