The number most freelancers hear is "30%." Set aside 30% of every invoice and you'll be fine. It's a reasonable starting point — but it's incomplete. Depending on your income and province, it can leave you short or make you over-save.
Here's a clear breakdown of what's actually in your tax bill and a practical framework for deciding how much to put aside.
What's Actually in Your Tax Bill
As a self-employed Canadian, your tax bill has three distinct components:
- Federal + provincial income tax — based on your net profit after expenses
- CPP contributions — you pay both the employee and employer portions
- GST/HST remittances — if you're registered, this is collected on every invoice and owed to the CRA
Most "save 30%" advice only accounts for income tax. CPP and GST/HST are separate — and together they can significantly change the number you actually need.
Federal Income Tax at a Glance (2025)
Federal tax brackets for 2025 (the rate was reduced from 15% to 14% on July 1, 2025, giving a blended 14.5% for the year):
- First $57,375: 14.5%
- $57,375–$114,750: 20.5%
- $114,750–$177,882: 26%
- $177,882–$253,414: 29.31%
- Over $253,414: 33%
The federal basic personal amount for 2025 is $16,129 — you pay no federal income tax on the first $16,129 of income. From 2026 onward, the lowest bracket drops to 14%.
These are federal rates only. Each province adds its own layer, which is why two freelancers with identical income can owe significantly different amounts depending on where they live.
The CPP Surprise
This is the part that catches most new freelancers off guard. Employees pay half of CPP and their employer covers the other half. As a self-employed person, you pay both.
For 2025: the self-employed CPP rate is 11.90% on net self-employment income between $3,500 and $71,300, for a maximum contribution of $8,068.20. CPP2 adds another 8% on earnings between $71,300 and $81,200 (max $792).
The good news: half of your CPP contribution (the employer-equivalent portion) is deductible from your net income, which reduces your income tax. But the full amount still needs to be in your account at tax time.
Quebec note: if you live in Quebec, you contribute to QPP (Québec Pension Plan) instead of CPP. The mechanics are identical — you pay both the employee and employer portions at the same rate — but the plan is administered by Revenu Québec, and QPP contributions appear on your provincial return rather than the federal T1.
GST/HST: It's Not Your Money
Once you cross the $30,000 revenue threshold and register for GST/HST, every invoice you send includes tax that belongs to the CRA. You collect it on their behalf — it is never your income.
The practical rule: open a dedicated account and move the GST/HST portion of every invoice there immediately. Never spend it. When remittance time comes (quarterly or annually), the money is already set aside.
The Quick Method and Input Tax Credits (ITCs) can reduce what you actually remit — consult an accountant to see which filing method is most advantageous for your situation.
👉 Use the Paymavo tax calculator — enter your income and province to see the exact GST/HST breakdown on any invoice.
The 25–35% Framework
These are rough guidelines based on net income (after business expenses) for most Canadian provinces. High-tax provinces like Quebec, Nova Scotia, and Prince Edward Island may require setting aside more.
- Under $50,000/year → 25% is generally sufficient
- $50,000–$100,000/year → 30% recommended
- Over $100,000/year or high-tax province → 35% or more
Important: these percentages cover income tax and CPP combined. GST/HST is separate — keep that money in a different account entirely.
Three Income Scenarios (Ontario, 2025)
To make the framework more concrete, here are approximate income tax + CPP totals at three income levels for an Ontario freelancer in 2025. These figures use only the basic personal amount and the CPP deduction — your actual bill will typically be lower once business expenses are claimed.
| Net income | Approx. income tax | CPP | Total owing | Suggested % to save |
|---|---|---|---|---|
| $40,000 | ~$4,400 | ~$4,300 | ~$8,700 | 25% |
| $70,000 | ~$11,000 | ~$7,900 | ~$18,900 | 30% |
| $100,000 | ~$19,800 | ~$8,900 | ~$28,700 | 32–35% |
At $40,000, the 25% rule leaves roughly $1,300 in reserve. At $70,000, you're close to 27% — the 30% rule gives you comfortable breathing room. At $100,000, 30% just barely covers the bill; 32–33% is safer, especially once installment interest risk is factored in.
In Quebec, provincial rates are higher (14–25.75%) and the combined burden is greater. Freelancers earning above $50,000 in Quebec should target 33–35%. Nova Scotia and Prince Edward Island also have higher top rates — if you're in those provinces, lean toward the upper end of the range.
The Practical System: Two Accounts
The simplest approach that works for most freelancers:
- Operating account — your money. Pay yourself, cover business expenses.
- Tax account — 25–35% of every client payment, moved immediately. Do not touch this.
If you're registered for GST/HST, add a third account (or a sub-account) for the tax you collect on invoices. That money leaves your hands at remittance time — treat it that way from day one.
Move the money the moment a payment clears. Every day you delay is a day you might spend it.
Quarterly Installments
If your net tax owing exceeds $3,000 (or $1,800 if you live in Quebec) in a given year and was also above that threshold in one of the two previous years, the CRA requires you to pay in quarterly installments.
Due dates: March 15, June 15, September 15, and December 15.
In your first year of self-employment, you typically don't owe installments. But once you file that first return and owe a significant balance, expect an installment reminder in the mail for the following year. If you've been saving consistently, making those payments is straightforward — the money is already there.
Missing installments has a cost. The CRA charges compound daily interest on late or insufficient installment payments. If you've been saving consistently and simply missed a deadline, the interest is modest. But if you haven't been saving and face a large April balance, interest accrues on top of an already painful bill. If the CRA sends an installment reminder, use it as a prompt to review your saving rate for the coming year.
The Bottom Line
The "30% rule" is a useful shortcut, but your actual number depends on your income level, province, and whether you're collecting GST/HST. The framework:
- Set aside 25–35% for income tax + CPP (based on your income level)
- Keep GST/HST collected in a completely separate account
- Move the money immediately — don't wait until April
👉 Try the Paymavo tax calculator — instantly see the GST/HST amount to collect on any invoice, by province.
