"Set aside 30%" is wrong for most freelancers, in both directions. Income tax is progressive: on €30,000 profit you owe about 14% in 2026, on €60,000 about 24%, on €120,000 about 35% with Solidaritätszuschlag. VAT is not part of that number; it was never your money. Use three bands: 15% up to €30,000 profit, 25% up to €70,000, 35% above. Then remember the second letter: after a good year the Finanzamt sets prepayments for the next one, due together with the back tax. If the new year is weaker, a one-page request under § 37 EStG lowers them.
Daniel Schöttler of ING told the story against himself at Freelance Unlocked 2026: eight months of very good freelance sales, a dream car, then two letters from the tax office, the second demanding an almost six-figure sum within ten days.
"Nachzahlung, Vorauszahlung kam bei mir gleichzeitig." (Daniel Schöttler)
Back tax and prepayments in one envelope. That is why the flat 30% guess fails: it ignores how the tariff curves, and it ignores the second letter.
Why 30% is the wrong number
Three things get blended into "30%" that should stay apart.
VAT is not yours. If you charge €5,000 plus 19%, the €950 belongs to the tax office from the day it lands. Move it to a separate account on receipt and forget it exists. Daniel's version:
"Der Umsatz, der erzielt wird, das ist nie ganz dein Geld. Steuern kommen immer zeitversetzt." (Daniel Schöttler)
Income tax is progressive. The 2026 tariff in § 32a EStG starts at zero up to the Grundfreibetrag of €12,348 (the BMF lists the €252 increase among its 2026 changes), climbs through two progressive zones to €69,878, charges 42% on every euro from €69,879, and 45% from €277,826. So the average rate on your whole profit is far below the marginal rate on your last euro.
Solidaritätszuschlag only above a threshold. In 2026 it applies once your income tax exceeds €20,350 for singles (€40,700 for joint filers), then at 5.5% with a sliding zone, according to the Techniker Krankenkasse (§ 3 Abs. 3 SolZG). Below roughly €75,000 of profit you do not pay it at all. Church tax, if you are a member, comes on top as a percentage of your income tax and varies by Bundesland.
The rule of thumb by profit band
Computed from the 2026 tariff for a single filer, taking profit as taxable income. That ignores deductible health insurance and other Sonderausgaben, so the real bill is usually a little lower. A reserve should err that way.
|
Profit 2026 |
Income tax |
Soli |
Effective rate |
|---|---|---|---|
|
€30,000 |
€4,217 |
€0 |
14.1% |
|
€50,000 |
€10,548 |
€0 |
21.1% |
|
€60,000 |
€14,233 |
€0 |
23.7% |
|
€80,000 |
€22,464 |
€252 |
28.4% |
|
€120,000 |
€39,264 |
€2,160 |
34.5% |
Three lines to remember:
- Profit up to €30,000: set aside 15%.
- Profit €30,000 to €70,000: set aside 25%.
- Profit above €70,000: set aside 35%.
Each line sits above the computed rate for its band, on purpose. Health insurance is not in the table; it is not a tax, but budget it separately. And the VAT account is a different account.
The worked example, including the second letter
A developer goes full-time freelance in January 2026, earns €60,000 profit, and has no prepayments set yet because there is no prior assessment. By the rule above she reserves 25%, so €15,000 across the year.
She files in spring 2027. The assessment arrives in, say, September 2027: €14,233 income tax for 2026, no Soli. Her reserve covers it with €767 to spare.
The same letter does the second thing § 37 Abs. 3 EStG tells the Finanzamt to do: it sets prepayments for 2027 based on the income tax of the last assessment, so €14,232 split into four instalments of €3,558, due 10 March, 10 June, 10 September and 10 December. Three of those dates have already passed by September 2027, so the instalments for them are due now too. The envelope contains €14,233 plus 3 × €3,558, about €24,900, and the December instalment follows three months later.
That is the moment Daniel described. It is survivable if the 2027 reserve has been building at 25% since January, roughly €11,000 by September, close to the three catch-up instalments. It is not survivable if the €15,000 was spent as "profit" and 2027 started from zero. His colleague Miguel Drescher put the rule in one sentence:
"Umsatz ist nicht gleich dein eigener Gewinn." (Miguel Drescher)
When and how to lower your prepayments
Prepayments assume this year looks like last year. When it does not, § 37 Abs. 3 lets the Finanzamt "die Vorauszahlungen an die Einkommensteuer anpassen, die sich für den Veranlagungszeitraum voraussichtlich ergeben wird". You have to ask; nobody at the tax office watches your pipeline.
When. As soon as your forecast drops materially. In our example: the developer's main client pauses in April 2027 and she now expects €35,000 profit. Tax on that is about €5,670, so €1,418 a quarter instead of €3,558. Filing in May keeps €2,140 per remaining instalment in her account, in exactly the quarter she needs it. Adjustment is possible until 15 months after the year ends, but the value is in filing early.
How. In Mein ELSTER the form is called "Antrag auf Anpassung der Vorauszahlungen", listed by the Finanzämter Baden-Württemberg among the requests you can file electronically. A letter or email to your Finanzamt works too. There is no fee.
What to attach. Profit year-to-date from your bookkeeping (BWA or EÜR export), the reason for the drop, your full-year estimate. One page. Wording that works:
Steuernummer [xxx]. Hiermit beantrage ich die Herabsetzung der Einkommensteuer-Vorauszahlungen für 2027. Grund: Mein Hauptauftrag ist im April 2027 ausgelaufen. Der Gewinn bis 30. April beträgt [x] €, für das Gesamtjahr erwarte ich rund 35.000 €. Ich bitte darum, die Vorauszahlungen ab dem 10. Juni 2027 entsprechend anzupassen. Eine Aufstellung liegt bei.
In English: "I request a reduction of my income tax prepayments for 2027. Reason: my main contract ended in April 2027. Profit to 30 April is €x, expected full-year profit about €35,000. Please adjust the prepayments from 10 June 2027. Summary attached."
Two guard rails. Prepayments are only set at all from €400 a year and €100 per date (§ 37 Abs. 5 EStG), so tiny adjustments are pointless. And if the year recovers, the instalments can be raised again; the final assessment settles the difference either way. A lowered prepayment is a cash-flow tool, not a tax saving.
What to do on Monday
- Open two sub-accounts: one for VAT, one for income tax. Transfer the VAT on every incoming payment the day it arrives.
- Estimate your 2026 profit, pick the band (15%, 25%, 35%), and check whether your income-tax reserve matches it. Top up the gap in monthly steps rather than in December.
- Find your last Vorauszahlungsbescheid. Compare the instalment with a quarter of your expected 2026 tax. If it is more than 20% too high, draft the adjustment request this week.
- Diary the four dates, 10 March, 10 June, 10 September, 10 December, plus the month your assessment usually arrives.
- If you filed 2025 late or expect a large 2025 back payment, reserve for it now, separately from the 2026 band.
A reserve is only as steady as the revenue feeding it. If one client going quiet would break the 25%, the fix is a second and third client, and a free 9am profile puts you in front of companies across DACH that hire freelancers directly.
The five traps around this one are in Financial traps for freelancers, the whole bookkeeping system in Freelance taxes in Germany explained, and what to deduct before you compute profit at all in the Betriebsausgaben checklist 2026.
This article is general information for practitioners and does not replace tax or legal advice.
Freelance Unlocked is co-organized by 9am together with Uplink and freelancermap. This article draws on the session of Daniel Schöttler and Miguel Drescher at Freelance Unlocked 2026. Watch the full talk above, and join us at the next edition: freelanceunlocked.com.
