Taxes for self-employed persons

As a self-employed person in the Netherlands, you pay all kinds of taxes. Income tax, sales tax (VAT) and possibly corporation tax if you have a private limited company. Fortunately, you can benefit from tax deductions such as the self-employed person's allowance, SME profit exemption and KOR (small business scheme). In this article, you can read about the taxes you pay as a self-employed person, when to file your tax return, and how to make smart use of tax benefits.

Why taxes work differently for self-employed professionals

When you are employed, your employer automatically deducts income tax.
As a self-employed person, you are responsible for everything from your invoices to your tax return. This may seem complicated, but with a little structure, it is not so difficult. Your income from self-employed assignments is considered business profit. You pay income tax on this profit, but thanks to tax regulations, you often pay less than you think.

What taxes do you have to pay as a self-employed person?

There are three main types of tax to consider:

Income tax

You pay tax on your profits. This is your turnover minus deductible costs. You then apply various deductions to this amount (see below).

Sales tax (VAT)

Most self-employed professionals charge their customers 21% VAT. You pay this to the tax authorities every quarter, but you can deduct the VAT you pay on business purchases.

Corporation tax (only for private limited companies)

Do you work as a sole trader? Then no. If you have a private limited company, you pay corporation tax on the profits, and then income tax on your salary or dividends. Municipal taxes or environmental taxes may also apply, depending on your activities.

How does income tax work for self-employed persons?

Income tax as a self-employed person may seem complicated, but it's not too bad once you know the steps. It's wise to start by calculating your profit. Deduct all business expenses from your turnover. Think of your laptop, office space, car, insurance and training, everything you need for your work. Then apply the entrepreneur's allowance. Do you work at least 1,225 hours per year? Then you are entitled to the self-employed person's allowance, and as a starter you may also be entitled to the starter's allowance. That makes a big difference.

Next comes the SME profit exemption. Another 14% of your remaining profit can be deducted. Only then do you pay tax on what remains, which falls under box 1. So you only pay tax on part of your profit, not on everything you earn. That's why good administration is worth its weight in gold. Keep every receipt and keep track of your hours. That may sound boring, but every pound you can deduct is a pound less in tax. And that adds up.

What is the difference between income tax and sales tax?

Income tax is what you personally pay to the tax authorities on your profits. Sales tax (VAT) is money that you temporarily collect for the tax authorities via your customers.

VAT is therefore not a real expense; you are merely a conduit. Nevertheless, it is important to administer it correctly, because errors in your VAT return can lead to fines or clawbacks.

When do you file your VAT return?

In most cases, every quarter. You will automatically receive reminders from the Tax and Customs Administration via My Tax and Customs Administration. Business. You must do this by 31 January for Q4 of the previous year and before 30 April, 31 July and 31 October for the other quarters.

Ensure that your VAT is paid on time. Late payment will result in interest or penalties. Consider using accounting software that automatically tracks VAT.

What is the small business scheme (KOR)?

Do you earn less than €20,000 in turnover per year? Then you can opt for the KOR. This means you do not charge VAT to customers and no longer have to file VAT returns. That sounds attractive, but it has advantages and disadvantages. The advantages are that you have less administration and that customers see lower prices, which is useful for private individuals.

Disadvantages? You can no longer reclaim VAT yourself, and large business customers sometimes find it less professional. The KOR is particularly useful if you incur few costs and mainly supply to consumers.

Which deductions are beneficial for self-employed professionals?

Dutch tax law offers a number of advantages to stimulate entrepreneurship. The most important ones are:

• Self-employed tax deduction with a fixed discount on your profits (2025: €3,750).

• Start-up allowance, which gives you an additional benefit during your first three years as an entrepreneur.

• SME profit exemption is also beneficial, with a 14% deduction on your profit after self-employed person's allowance.

• Retirement reserve or annuity as a deductible pension accrual.

• And, of course, the investment allowance (KIA) as an additional discount if you invest in business assets.

When do you pay tax as a self-employed person?

There are three fixed times when money goes to the Tax and Customs Administration. You pay VAT returns quarterly. You pay income tax annually, no later than 1 May. A provisional assessment is optional. With a provisional assessment, you pay an estimated amount each month, so you don't have to pay everything at once. This helps spread your tax burden.

How does the small business scheme (KOR) work in practice?

Imagine you work as a freelance photographer with an annual turnover of €17,000. Thanks to the KOR, you do not have to charge VAT or file a tax return. You simply invoice €17,000 without 21% VAT. This saves a lot of administration and makes your prices more attractive to private individuals.

But beware! Are you buying a new camera for €2,000? Then you cannot reclaim the €420 VAT. That is why the KOR is only beneficial if you have few business expenses. If you earn more than €20,000 per year on a structural basis, you must leave the scheme. You will then automatically become liable for VAT and will have to invoice with VAT again.

How can you make the most of VAT deductions?

If you charge VAT, you can reclaim VAT on business expenses. Many self-employed people miss out on this opportunity. Therefore, keep all receipts and invoices with VAT specifications. Also consider small expenses such as your telephone, laptop, workspace, and internet. Do you travel by public transport or car? Then keep a record of your business mileage. And pay for large purchases (such as equipment) with your business account, not your personal account.

Even if you use part of a product privately (for example, your laptop 70% for business purposes), you may deduct that percentage. It is best to use accounting software that automatically processes VAT, as this prevents errors in your quarterly returns. Read more about smart accounting for self-employed professionals here.

How can you save tax wisely as a self-employed person?

You can save on tax with smart planning. Are you investing between €2,801 and €387,580 in business assets? Then you are eligible for the small-scale investment deduction (KIA). This gives you up to 28% extra deduction, which is not bad for a new laptop or company car that you needed anyway.

Pension accrual also has tax advantages. With an annuity or bank savings scheme, you can reduce your taxable income now and only pay tax when you retire. So it's a double advantage!

Be sure to work with a provisional assessment to avoid surprises. Otherwise, you may suddenly receive an additional tax assessment of thousands of pounds next year, which always comes at a bad time.

What are common mistakes made when filing tax returns?

Self-employed entrepreneurs often make the same mistakes. By knowing what they are, you can easily avoid them. One of the most common mistakes is insufficient time registration. The self-employed tax deduction will lapse if you cannot prove that you have spent 1,225 hours on your business. So use an app or Excel to keep track of this.

Please also note that VAT is not your money. Set it aside in a savings account as soon as you receive payment for your invoices. Failing to file your tax return on time is also risky, as late filing penalties can run into hundreds of pounds. Set reminders and use automatic notifications.

Many self-employed people are unaware that training courses, telephone costs and even a home office are partially tax-deductible. A dinner with friends does not count, even if you talk about work for a while. The tax authorities keep a close eye on this.

What if you cannot pay?

Are the attacks coming at a bad time? Do not panic. In many cases, you can arrange a payment plan.

In the event of a temporary dip in income, you can obtain a three-month deferral via My Tax and Customs Administration Business. For larger amounts, you can request a payment plan. The tax authorities will then charge interest, but this is usually cheaper than being overdrawn. In any case, try to avoid not communicating with them!

When is it worthwhile to switch to a limited company?

If your profits exceed approximately €100,000 per year, a private limited company may be more advantageous from a tax perspective.
You will first pay corporation tax (19% on profits up to €200,000) and then income tax on your salary or dividend.

A private limited company also protects private assets, which can be beneficial in terms of risks or personnel. For most self-employed persons, a sole proprietorship is simpler and less expensive.