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Tax basics for the self-employed — honestly explained
For many, tax is the scariest part of being self-employed — yet a few basics are enough to avoid the expensive surprises. Here's the essentials in plain language, no legal jargon. No prior knowledge needed. (Context: the German-speaking region — DACH.)
Which taxes apply to you
Income tax
On your profit (revenue minus business expenses), not on turnover. The more you earn, the higher the rate. It's settled once a year via the tax return — often with advance payments during the year.
VAT (value-added tax)
You add it to your invoices and pass it to the tax office — it's never yours. In return you reclaim the VAT on your purchases (input tax). Tip: it's a "pass-through" item — don't confuse it with your profit.
Small-business rule
Below certain revenue thresholds (varies by country) you can skip charging VAT — less paperwork, but you also can't reclaim input VAT. Especially worth it if your clients are private individuals.
Others, depending on country/form
In Germany, trade businesses also pay trade tax; Switzerland and Austria have their own systems. Pure freelancers are often exempt from trade tax. Clarify your exact case specifically.
The 7 honest rules
1. Set aside a share immediately
From every payment, a fixed share goes to a separate tax account — many use roughly a quarter to a third, depending on income and country. Then the tax bill never catches you unprepared.
2. Separate business and private
A dedicated business account. It saves hours of bookkeeping and makes clear what's truly business.
3. Keep every receipt — digitally
No receipt, no expense you can deduct. Photograph receipts right away and file them in order. It's the biggest lever for a lower tax bill.
4. Know your deadlines
VAT pre-registrations (monthly/quarterly) and the annual return have fixed dates. Missing them costs surcharges. Put them in your calendar with lead time.
5. Only deduct what's truly business
Laptop, software, office, training, work trips — yes. The private lunch — no. In grey areas, ask rather than risk trouble later.
6. Plan for advance payments
If business goes well, the tax office often sets advance payments for next year. Not planning for this means suddenly facing two demands at once.
7. Get professional help early
Once it gets complex, a tax advisor usually saves more than they cost — and takes the stress and liability risk off your plate.
AI does the busywork — not the responsibility
AI can pre-sort receipts, draft booking texts and pre-formulate questions — it doesn't replace your tax return. aban news shows daily where AI really helps in business. Free.
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Common questions
How much tax should I set aside as a freelancer?
There's no fixed number — it depends on income, country and legal form. Many set aside roughly a quarter to a third of each payment into a separate account to avoid surprises. This is not tax advice.
What is the small-business rule?
Below certain revenue thresholds (DE/AT) you can skip charging VAT — simpler, but you also can't reclaim input VAT. Thresholds differ by country and change; check the current rules.
Do I need a tax advisor?
Not necessarily, but once it gets complex a professional often saves more than they cost — and prevents expensive mistakes. For the basics, clean receipts and reserves are enough.
aban news is a Swiss sole proprietorship and does not provide tax, legal or financial advice. All content is for general information and does not replace individual advice. Tax rules change and differ by country — check the current status or consult a licensed professional.