How to Estimate Malaysia Taxes for Self-Employed?

If you’re self-employed in Malaysia — whether as a freelancer, consultant, or small business owner — estimating your annual tax can be confusing.
Unlike salaried employees, your tax isn’t automatically deducted through MTD/PCB, so you need to calculate it yourself based on your net business income.

This guide explains step-by-step how to estimate your Malaysia income tax as a self-employed individual, including what to deduct, which tax rates apply, and how to plan your payments.

Calculate Your Net Business Income

Start by figuring out how much profit you actually earned from your work or business.
Malaysia taxes net profit, not your total revenue.

Formula

Gross Business Income – Allowable Business Expenses = Net Profit

Gross Business Income Includes:

• Fees from clients or customers
• Commissions and service charges
• Rental or business-related side income
• Any other income directly earned from your work

Allowable Business Expenses Include:

Expense Type	What Qualifies	Notes
Office rent or home-office portion	If used exclusively for work	Keep utility bills and receipts
Marketing, web hosting, and domain	Related to your business	Deduct 100% if solely business use
Software, internet, phone	Used for work	Proportion if shared personally
Travel and transport	Business trips only	Keep mileage records
Professional fees	Accounting, legal, registration	Fully deductible

Example:

• Annual income: RM 80,000
• Business expenses: RM 10,000
  → Net profit = RM 70,000

This net profit forms the foundation of your tax estimate. When preparing documents for LHDN, the Malaysia Income Tax Calculator helps verify your expected tax.

Add Other Income and Subtract Personal Reliefs

Once you know your net business profit, add any other income you earn — such as rental or dividends — to get your total income.
Then, subtract personal reliefs to reduce your taxable amount.

Common Tax Reliefs for 2025:

Category	Relief Amount (Max)
Individual taxpayer	RM 9,000
EPF and Life Insurance	RM 7,000
SOCSO + EIS	RM 350
Lifestyle (books, laptop, internet)	RM 2,500
Medical expenses (self/parents)	RM 10,000
Spouse and Child Relief	RM 4,000 – RM 8,000

Try the Malaysia Tax Relief Calculator to find out all the deductions you qualify for.

Apply Malaysia’s Progressive Tax Rates (YA 2025)

After deducting reliefs, you’ll get your chargeable income — this is the amount subject to Malaysia’s progressive income tax rates.

Chargeable Income (RM)	Tax Rate	Example Tax (RM)
0 – 5,000	0%	0
5,001 – 20,000	1%	150
20,001 – 35,000	3%	450
35,001 – 50,000	8%	1,200
50,001 – 70,000	13%	2,600
70,001 – 100,000	21%	6,300
100,001 – 250,000	24%	—
250,001 and above	24.5% – 28%	—

Example Calculation
Net profit after reliefs: RM 60,000
Tax payable:

• First RM 50,000 = RM 2,450
• Remaining RM 10,000 × 13% = RM 1,300
  → Estimated tax = RM 3,750

You can double-check your result with the Malaysia Income Tax Rate Calculator for the latest rates.

Plan Your Tax Payments (Form B Filing)

As a self-employed person, you file using Form B — not the standard Form BE used by salaried employees.
This form reports both your business and other personal income.

Filing deadlines:

Action	Deadline
Submit Form B (e-Filing)	By 30 June 2025 (for YA 2024)
Pay Balance of Tax (if any)	Same date

If your annual tax exceeds RM 2,000, LHDN may require instalment payments (CP500) the following year.

Tip: Set aside 20–25% of your monthly income for taxes. It prevents year-end surprises and keeps your cash flow healthy.

Understand How Self-Employed Tax Differs from Employees

Category	Self-Employed	Employee
Tax deducted monthly	No (you pay directly)	Yes (via MTD/PCB)
Form type	Form B	Form BE
EPF & SOCSO	Optional (voluntary)	Mandatory
Relief claims	Must track personally	Some auto-deducted
Filing deadline	30 June	30 April

You can simulate both cases using the Monthly Tax Deduction Calculator to compare how much employees pay vs freelancers.

Example of Estimating Self-Employed Tax

Let’s take a realistic example:

Description	Amount (RM)
Gross business income	85,000
Deduct business expenses	12,000
Net profit	73,000
Less tax reliefs	15,000
Chargeable income	58,000
Tax payable	~RM 3,400

You can confirm your estimate with the Malaysia Salary Tax Calculator for the same income bracket.

Common Mistakes and Tax Tips for Self-Employed Malaysians

Avoid these mistakes:

• Not keeping proper expense records.
• Forgetting to include side income (rental, commissions).
• Missing out on personal reliefs and donations.
• Waiting until the deadline to estimate taxes.
• Mixing personal and business expenses.

Pro Tips:

• Track income monthly to avoid guesswork later.
• File on time to avoid late penalties (up to 10%).
• Contribute voluntarily to EPF or SOCSO for relief eligibility.
• Use accounting apps or spreadsheets to simplify records.

Frequently Asked Questions

1. How much tax do self-employed people pay in Malaysia?
It depends on your net profit and reliefs. Most freelancers pay between 8% and 21% on chargeable income.

2. What tax form do I use?
Use Form B for business or freelance income.

3. Can I deduct my laptop or internet bills?
Yes — if they are used for business purposes. Keep receipts for LHDN proof.

4. When should I pay my self-employed tax?
By 30 June every year (via e-Filing). If required, you’ll make biannual CP500 instalments.

5. Do foreigners or digital nomads need to pay?
Yes, if you earn income derived from Malaysia or stay more than 182 days per year (resident status applies).

• Before estimating payments as a freelancer or business owner, it’s essential to understand how to calculate your Malaysia income tax.
• To get a quick annual estimate based on net income, self-employed individuals can start with the main Malaysia income tax calculator.
• Since progressive tax bands still apply, reviewing the current Malaysia income tax rate for 2025 helps ensure accurate projections.
• Unlike salaried employees, freelancers must plan for payments in advance, which makes understanding what is my Malaysia tax liability especially important.
• Claiming allowable expenses can significantly reduce tax payable, so it’s worth pairing this guide with the Malaysia tax relief calculator.
• If your income fluctuates due to project bonuses or incentives, you can model those variations using the Malaysia bonus tax calculator.
• After estimating total tax and instalments paid, you can assess whether you may owe additional tax or receive money back with the Malaysia tax refund calculator.