8 min read Intermediate June 2026

How Much Should You Set Aside for Taxes

The percentage question every gig worker asks. We'll show you the calculation method that actually works and how to adjust it based on your situation.

Ceramic piggy bank with stacked coins beside a ledger showing tax percentage calculations and monthly savings amounts

Written by

GigFlow Editorial Team

Editorial Team

Written by the GigFlow editorial team, focused on practical, honest guidance for freelancers managing their side hustle finances.

The Core Question

You're making decent money from your side gig. But there's this nagging worry: how much do you actually owe in taxes? Most gig workers I've talked to pull a number out of thin air — sometimes it's 20%, sometimes 30%, sometimes they just hope it'll be fine.

Here's the reality. There's no magic percentage that works for everyone. Your tax obligation depends on your actual income, your expenses, where you live, and what kind of work you do. But there IS a method that works. And it doesn't require hiring an accountant (though that's never a bad idea).

The biggest mistake? Setting aside too little. You'll owe money you don't have. The second biggest? Setting aside way too much and tying up cash you could use to grow your business.

01 The Calculation That Actually Works

Forget percentage guessing. You're going to calculate your actual tax rate. It's straightforward, and it takes maybe 20 minutes.

Start with your net income — that's total earnings minus business expenses. Things like software subscriptions, equipment, supplies, home office portion of rent if you're working from home. Keep receipts. You'll need them anyway.

Once you've got your net income, you need to account for self-employment tax. This is the big one most people forget. When you work for yourself, you're paying both the employee and employer portion of payroll taxes. In Canada, that's roughly 9.9% on your net income for 2026. Add your marginal income tax rate on top of that.

So if your marginal tax rate is 30% and self-employment tax is 9.9%, you're looking at roughly 40% of your net income going to taxes. That's your starting point. Not a guess. A real number based on your actual situation.

Notebook with tax calculation worksheet showing net income, tax rate breakdown, and monthly set-aside amount calculation in clear columns

Monthly budget spreadsheet on laptop screen showing income columns, tax allocation rows, and remaining cash flow for business reinvestment

02 Adjusting For Your Reality

That 40% number? It's a starting point, not a law. You might owe less. You might owe more. Here's how to adjust.

If you have other income — a day job, investments, a spouse's income — your marginal tax rate might be higher. You're pushed into a higher bracket. That 30% might become 35% or 40%. Adjust accordingly.

If you've got huge expenses — you're running a service business with minimal costs versus a product business with inventory and shipping — your net income is lower relative to gross income. That actually works in your favor. Less net income means less tax.

And here's something people don't think about: you might get some of that money back. RRSP contributions reduce your taxable income. Claiming home office expenses reduces it further. These aren't tricks — they're legitimate deductions. Account for them when you're doing your calculation.

03 Making It Actually Work Month to Month

Let's say you've calculated you owe 38% in taxes on your net income. Now comes the part people struggle with: actually setting that money aside.

Open a separate savings account. Seriously. Call it "Tax Reserve" or "Tax Savings" — something that reminds you what it's for. Every time you get paid from your gig, calculate 38% of that amount and move it to the tax account immediately. Don't wait. Don't think about it. Just move it.

Why immediately? Because money in your main account is easy to spend. You see $1,000 come in, your brain thinks you have $1,000 to spend. If you move $380 to tax savings right away, you've only got $620 to work with. That's the real number. That's what you actually have.

Some months you'll have more income, some months less. The beauty of this system is that it self-corrects. High month? You set aside more. Low month? You set aside less. Over a year, it averages out.

Person writing in monthly budget planner with sections for income, tax allocation, and business expenses clearly labeled and color-coded

04 Quarterly Payments and When You're Ahead

Here's something that catches people off guard: if you owe more than a certain amount in taxes (the threshold changes yearly, but it's usually around $3,000), you might need to make quarterly installment payments. It's not optional. It's a requirement.

The good news? If you've been setting aside 38% every month, you're already ahead. When that quarterly payment is due, you've got the money sitting there. You're not scrambling. You're not going into debt. You're just moving money that you already knew was going to be needed.

The bad news? If you haven't been setting aside enough, quarterly payments are going to hurt. That's why this system matters. It's not about being perfect with your taxes. It's about having cash flow that actually works with your tax obligations, not against them.

Tax savings account statement showing accumulated monthly deposits and quarterly payment deductions with remaining balance highlighted

05 The Buffer Strategy

Here's the pro move: set aside slightly more than you think you'll owe. Not crazy more. Just 2-3% extra. Why? Because tax rules change. Your accountant might find deductions you missed. Your income might be higher than expected.

If you calculated 38% but you set aside 40%, and at the end of the year you owe exactly 38%, you've got a small cushion. That extra 2% becomes a buffer. It covers any calculation errors. It covers rule changes. It covers the fact that you might've miscounted something.

And honestly? Having a small tax buffer is one of the best feelings as a gig worker. You file your taxes. The number comes back. You've got the money. No stress. No payment plan. Just smooth cash flow.

Setting Yourself Up For Success

The percentage question doesn't have one right answer. It depends on your income, your expenses, your other income sources, and your location. But the method does work. Calculate your actual rate, adjust for your reality, set aside that amount every single month, and you'll never be caught off guard.

Most gig workers struggle with taxes because they treat them as an afterthought. You're treating them as a core part of your cash flow. That's the difference between stress and stability. That's the difference between owing money you don't have and being ready when the bill comes due.

This article is educational only and is not financial or investment advice. Tax obligations vary by location, income level, and business structure. Outcomes are not guaranteed and may vary. Consult with a qualified accountant or tax professional for personalized guidance specific to your situation.

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