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How much should you set aside for tax?
Type six figures. You get your monthly tax set-aside, your Floor, your Cushion target, and your Runway in weeks. Nothing is stored and nothing is asked for.
These figures are cash planning, not a tax return. The set-aside rate is a planning rate chosen to be slightly high, because being over-set-aside costs you nothing and being short costs you a penalty.
$21,600 across the year at 30%. Owed, not yours. Set aside $1,260 of a $4,200 payment the day it clears.
Your worst month covers Fixed 1.03 times over. Plan on this number, not on your average.
A floor month leaves you $660 short of Fixed once tax is set aside.
Held back, not saved. Your income shape needs 16 weeks of cover before anything else is optional.
On these numbers you can cover Fixed for 7.6 weeks with no new income, after the tax on your recent income is set aside.
Fix first
Your floor month is $660 short of Fixed after tax. Cut Fixed before you build the Cushion.
| 01 | Tax Pot | 30% | $1,260 |
| 02 | Cushion | 20% | $840 |
| 03 | Spend | 50% | $2,100 |
In that order, every time, without a decision.
This is cash planning. It recommends no financial product, projects no return, and takes no money from any financial institution. Confirm tax rates and dates for your own situation.
The Read goes further, free.
The Read reads your last twelve months of payments, argues with the numbers you typed, and dates your Tax Pot. It opens shortly. The monthly letter says when.
The short answers
- How much should I set aside for tax as a freelancer?
- As a planning rate, 30% of everything that comes in, moved the day it clears. In the United States that covers self-employment tax and a middle federal bracket, with state tax on top. In the United Kingdom it covers basic-rate income tax and Class 4 National Insurance. It is deliberately slightly high: being over-set-aside costs you nothing, being short costs you a penalty and a bad week.
- Why set aside a percentage of each payment instead of once a quarter?
- Because the money stops feeling spendable. A quarterly transfer requires you to still have it in three months. A percentage moved the day a payment clears requires nothing of your discipline later. That is the whole idea behind a Landing Rule.
- Should I budget on my average month?
- No. An average month is a month you have never had. If you made $6,000 in March and $1,800 in April, your average is $3,900 and your reality is $1,800. Build the plan on the low month, which we call the Floor, and treat everything above it as money to set aside rather than money to live on.
- What is runway and why in weeks?
- Runway is how long your money covers your fixed costs with no new income. In weeks, because months are too coarse to act on: the difference between 9 weeks and 13 weeks changes what you do this month, and both round to 'about three months'. The figure above counts only money that is actually yours, so it subtracts the tax you have not yet set aside on your recent income.
- How big should my cushion be?
- It depends on how thin your worst month is against your fixed costs. If your Floor comfortably clears Fixed, eight weeks of cover is enough. If your Floor barely covers Fixed, you need twelve. If it does not cover Fixed at all, sixteen weeks, and cutting Fixed comes before building the Cushion.
- Is this tax advice?
- No. It is cash planning. It gives you a set-aside rate to hold money against a bill, not a calculation of the bill. Formed Pipette recommends no financial product, projects no return, and takes money from nobody but the people who buy the Plan.
A calculator is a snapshot. A plan is a year.
The figures above are as honest as the numbers you typed. The Plan is built on your real payment history, dates your tax, sets your Landing Rules, and comes back every month for twelve months to update itself.
What the Plan includes| What you get | This page | The Plan |
|---|---|---|
| Tax set-aside rate | Yes | Dated, by quarter |
| Runway in weeks | Yes | Recalculated monthly |
| Landing Rules | One payment | Every payment, for a year |
| Read from your own payments | No | 3 to 12 months of CSV |
| Debt payoff order | No | Yes |
| Monthly Check-in | No | 12, by email |
| Price | $0 | $79 once |