Income tax + MediSave on trade income.
Total obligation
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Income tax
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Compulsory MediSave
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Your breakdown
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Two bills, not one, when you work for yourself
An employee in Singapore has their income tax and full CPF quietly handled around them. Strike out on your own as a freelancer, sole proprietor, or partner, and you take on two separate obligations that the calculator above sizes together. The first is income tax on your net trade income, charged at exactly the same progressive resident rates as everyone else, with the same reliefs available. The second is a compulsory MediSave contribution to your CPF MediSave account. There is no full CPF for the self-employed, only this MediSave slice, so people often forget it until IRAS and the CPF Board come asking.
Net trade income is the figure that matters, and it is your revenue after deducting allowable business expenses, not your gross billings. Get that number right first, because both the tax and the MediSave are calculated from it. The tool starts from net trade income and shows the income tax, the MediSave, and the combined cash you need to set aside.
MediSave kicks in, and then it is capped
The MediSave contribution is owed once your net trade income passes $6,000 for the year. Below that, there is nothing to pay. Above it, the rate runs with age, from 8 percent for those under 35, stepping up to 10.5 percent for the 50-and-above band, reflecting the rising healthcare needs the MediSave account is meant to fund. Crucially, the contribution is not unlimited. It is capped, because it is only levied on income up to the CPF annual ceiling, which works out to a maximum MediSave contribution in the region of $37,740 even for very high earners. So the MediSave obligation does not keep climbing forever as your income grows.
A $100,000 trade income, under 35
Take a sole proprietor with $100,000 of net trade income, under 35, so the MediSave rate is 8 percent. The income tax is computed on the progressive resident brackets before any reliefs, and the MediSave is 8 percent of the income, well under the cap.
The income tax of $5,650 is actually the smaller of the two lines. The MediSave of $8,000 is larger, which surprises a lot of newly self-employed people who budget only for tax. The breakdown chart in the calculator above puts the two side by side so the split is obvious.
Trimming the tax half of the bill
The calculator shows income tax before reliefs to keep the picture clean, but the self-employed have the same toolkit as everyone else to shrink it. Earned Income Relief applies. So do the family reliefs, and CPF cash top-ups and SRS contributions, all of which reduce chargeable income, subject to the overall $80,000 personal income tax relief cap. There is one move available only to the self-employed worth flagging: voluntary CPF contributions to all three accounts, capped relative to your income, which both build your CPF and can be deducted, on top of the compulsory MediSave you owe anyway.
Two practical habits separate people who cope from people who get a nasty letter. First, set aside cash for both obligations as you earn, ideally in a separate account, because unlike an employee you receive your income gross and the bills arrive later. A rough rule for a mid-income freelancer is to reserve a fifth to a quarter of net income for the combined tax and MediSave. Second, the MediSave is genuinely compulsory and the CPF Board can withhold it before you renew certain licences or work permits, so do not treat it as optional just because no employer is deducting it for you.
Should I incorporate a company instead of staying a sole proprietor?
It depends on scale. As a sole proprietor, profits are taxed in your hands at personal rates that top out at 24 percent, whereas a company pays a flat 17 percent corporate rate with partial exemptions on early profits. At higher and stable income levels, incorporation can lower the rate and separate business liability from you personally. At modest or irregular income, the compliance cost and the loss of the simpler sole-proprietor treatment often outweigh the saving. It is a judgement worth running with an accountant once your net income is consistently into six figures.
Do I need to register for GST as a freelancer?
Only once your taxable turnover crosses $1 million in a 12-month period, which is the compulsory GST registration threshold. Most solo freelancers never reach it. Below that figure registration is voluntary, and for a small service business selling to consumers it is usually not worth the administrative burden. If you do cross $1 million, registration becomes mandatory and you must then charge 9 percent GST and file returns, so keep an eye on a rolling 12-month total rather than the calendar year alone.