Setting aside tax as you earn

The defining financial risk of self-employment is not earning too little. It is spending money that was never yours.

The rule: separate the tax on the day you are paid

Every time an invoice is paid, move a fixed percentage into a separate savings account immediately. Not monthly. Not at year end. The same day.

How much? Calculate your effective rate - income tax plus self-employed social contributions divided by profit - and add a margin. For many people 25-30% of profit is a reasonable starting point, rising with income. If you are registered for VAT/GST, that money is collected on behalf of the authority and is not yours at any point; keep it separate too.

The first-year trap

Several countries operate payments on account: at the end of your first year you pay the tax due, plus an advance instalment towards the next year - which can mean paying roughly one and a half years of tax in one go. People who saved only for the first year get caught by this every single January.

Assume it applies until you have confirmed it does not.

Know your dates

Learn three dates for your country: when the tax year ends, when the return is due, and when payment is due. Filing and paying are often different deadlines, and penalties usually apply to both separately. Put all three in your calendar with a month's warning.

Reduce the bill legitimately

Claim every allowable expense, consider pension contributions (usually deductible and one of the few genuinely large levers), and check whether your structure still suits your profit level. Aggressive schemes promising to eliminate tax reliably end badly.

Get help at the right point

An accountant typically costs less than the errors and missed deductions they prevent once your profit is meaningful. mySal can estimate and organise; it cannot file your return or replace professional advice.