Tax · 8 min read
Tax Reserve for the Self-Employed in Germany: How Much to Set Aside in 2026
Employees in Germany have wage tax withheld every month. The self-employed receive their fees in full, and the tax office's bill often arrives one or two years later. If the money has been spent by then, things get difficult quickly, especially after the first successful year.
This guide shows how the tax burden of a sole trader or freelancer in Germany is made up, how to turn it into a monthly reserve, and which mistakes most often lead to unpleasant surprises. It is based on sections 32a, 35 and 37 of the Income Tax Act (EStG), the Solidarity Surcharge Act and section 11 of the Trade Tax Act (GewStG). Status: October 2026. The figures are estimates, not tax advice.
What your tax bill is made of
For freelancers and traders, income tax is the largest item. It is based on taxable income: the profit from your cash-basis accounts (EÜR) minus special expenses such as health, care and pension contributions. For 2026, section 32a EStG sets a basic tax-free allowance of €12,348. Above it the rate rises progressively; the 42 % top rate starts at €69,879 and 45 % at €277,826. Married couples filing jointly use the splitting method.
The solidarity surcharge is 5.5 % of income tax, but only applies once income tax exceeds €20,350 (€40,700 for joint filers), and above that threshold it phases in gradually. Most self-employed people therefore pay none. Church members also pay church tax of 8 or 9 % of income tax, depending on the federal state.
Traders (Gewerbetreibende) also pay trade tax. Trade income is rounded down to the nearest €100, reduced by an allowance of €24,500 and multiplied by the base rate of 3.5 %; the result, the base amount (Messbetrag), is then multiplied by the municipality's multiplier (Hebesatz). Liberal professions such as designers, doctors or translators do not pay trade tax.
- Income tax under section 32a EStG (2026 tariff)
- Solidarity surcharge only above the threshold
- Church tax of 8 or 9 % if you are a church member
- Trade tax only for a trade, with the section 35 EStG credit
Trade tax: less dramatic than it looks
At first sight, trade tax looks like an extra burden. For sole traders, though, section 35 EStG offsets most of it: income tax is reduced by four times the base amount, capped at the trade tax actually payable and at the share of income tax attributable to trade income.
At a multiplier of 400 %, trade tax equals exactly four times the base amount, so it is fully credited in arithmetic terms. An example with the Toolula calculator: at a profit of €80,000 the base amount is €1,942 and trade tax at 400 % is €7,768; income tax falls by the same amount, and the total burden stays the same. At a multiplier of 490 %, trade tax rises to €9,516 while the credit stays at €7,768, so you pay about €1,750 more in total.
What this means in numbers
Three examples for a single freelancer without church tax and with €8,000 of deductible insurance and pension contributions, calculated with the 2026 tariff. At €30,000 profit, income tax is €2,072, about 7 % of profit. At €50,000 it is €7,849, just under 16 %, or about €654 a month. At €80,000 it is €19,104, around 24 % or €1,592 a month.
The marginal rate matters more than the average. Of every extra euro of profit, considerably less is left than the average suggests. In the example, an extra €100 of profit costs about €33 in tax at €50,000 and €42 at €80,000. If you take on a large additional job during the year, set aside the marginal rate for it rather than the average.
These percentages refer to profit, not turnover, and they cover taxes only. Health and care insurance and your pension provision are separate expenses and need a firm place in your budget as well.
Prepayments and the second-year effect
Under section 37 EStG, income tax prepayments fall due on 10 March, 10 June, 10 September and 10 December. The tax office generally bases them on your most recent assessment. In the first year of self-employment, there are therefore often no prepayments at all, or very low ones.
When the first tax assessment arrives, you pay the full tax for the first year, and at the same time the tax office sets prepayments for the current year, possibly also for quarters that have already passed. Many founders are caught off guard by this pile-up. A reserve that starts with your very first fee prevents it.
If your profit rises or falls significantly, you can ask the tax office to adjust your prepayments. Asking for higher prepayments when profit grows sounds unattractive, but it spreads the burden more evenly.
Calculating and keeping the reserve
A separate savings account just for taxes is the simplest discipline: with every incoming payment, transfer a fixed percentage. VAT does not belong in this calculation. It is money passing through to the tax office and should be set aside in full and separately until you file the VAT return.
In Toolula's Tax Reserve Calculator you enter your Expected profit this year and Deductible insurance and pension, choose the Assessment, Church tax and, under Type of business, Freelancer or Trade (Gewerbe); for a trade, add your municipality's Trade tax multiplier (Hebesatz) %. With Tax prepayments already paid, the calculator shows the reserve for the year, the amount Per month and the share of profit, as well as what is Still to set aside.
The Breakdown lists taxable income, income tax, the trade tax credit, solidarity surcharge, church tax and trade tax separately. The calculator does not account for children, other income or loss carry-forwards, and it runs in your browser without sending your figures anywhere. Review the estimate once a quarter with your current numbers.
Frequently asked questions
What percentage should I set aside as a freelancer in Germany?
It depends on profit. With the 2026 tariff, a single freelancer with €50,000 profit and €8,000 of pension and insurance deductions pays just under 16 % of profit in income tax, and around 24 % at €80,000. For extra jobs, use the marginal rate. VAT and social insurance come on top and should be kept separately.
What is the basic tax-free allowance in 2026?
Under section 32a EStG it is €12,348 for single filers; for joint filers it is effectively doubled through the splitting method. The 42 % top rate starts at €69,879 of taxable income.
Do traders need a bigger reserve than freelancers?
Only if your municipality's multiplier is above 400 %. Up to that level, the section 35 EStG credit largely offsets trade tax in arithmetic terms. Above it, part of the trade tax remains an additional cost.
When are tax prepayments due?
On 10 March, 10 June, 10 September and 10 December. The tax office sets the amounts in a prepayment notice, generally based on your most recent assessment.
Does VAT belong in the tax reserve?
It should be set aside, but separately: the VAT you collect belongs to the tax office and is paid over with the VAT return. The Tax Reserve Calculator deliberately leaves it out.