Self-Employed in Germany: Costs in Your First Year

The first year of self-employment in Germany often feels cheaper than it is. No tax assessment, no advance payments, no chamber fee. The bill comes later, and it comes all at once. Founders who make €30,000 profit in year one and spend it all tend to remember the autumn of year two for a long time.

Here is every cost, with 2026 figures, in order of size.

The fixed costs at a glance

For a full-time service business without employees, the list looks like this. If you start on the side while employed, you can usually cross off health insurance.

Two lines decide how the year goes. Health insurance, because it is high and unavoidable. Tax, because it arrives late.

Health insurance: the biggest fixed cost

As a full-time self-employed person in public health insurance, you pay the whole contribution yourself. It is based on your income, but in 2026 never on less than €1,318.33 a month, a third of the reference figure of €3,955.

Earn more and the contribution rises with income up to the contribution ceiling. The insurer first sets it provisionally, usually from your own estimate, and settles up once your income tax assessment is available. Earned more than you estimated? Expect a bill for the difference, another cost that tends to land in year two.

Private insurance is the other option. Premiums depend on age, health and the plan, not on income, so they can look attractive for young, healthy founders. They also rise with age and do not drop when business is slow, and moving back into the public system later is hard. Treat it as a long-term decision, not a way to save money in year one.

People who receive the Gründungszuschuss start-up grant will notice what its €300 monthly supplement is really for: it covers almost exactly this minimum.

Pension: compulsory for some, a gap for many

Most self-employed people are not obliged to pay into the state pension. The Social Code names exceptions, though, including self-employed teachers and lecturers without employees subject to insurance, carers, midwives and craftspeople registered in the crafts register. Artists and writers are covered through the Künstlersozialkasse, which pays part of the contribution.

If you belong to none of these groups, you pay nothing and build nothing. Understandable at the start. Dangerous as a permanent state.

Taxes: why year two hurts

Year one usually brings no income tax, because the tax office does not yet know what you earn. Only after you file the return for year one does the assessment arrive, and with it three things at once: the back payment for year one, advance payments for the current year, and sometimes a retroactive increase for quarters that are already over.

Advance payments are due on 10 March, 10 June, 10 September and 10 December under § 37 of the Income Tax Act. If the tax office raises them retroactively, the difference for past quarters is due within a month of the notice.

Eight thousand euros in one autumn for a business making €30,000 a year. If nothing was set aside, you suddenly need exactly what you started without: capital. The simplest defence is a second account that receives a fixed share of every payment.

The basic tax-free allowance for 2026 is €12,348. Taxable income up to that amount is untaxed; above it, rates rise progressively.

VAT and trade tax

Under the small business rule in § 19 of the VAT Act, you charge no VAT as long as turnover stayed at or below €25,000 in the previous year and does not exceed €100,000 in the current year. Cross €100,000 during the year and the exemption ends from that sale. If you charge VAT, park it in a separate account from day one. It was never yours.

Sole traders only pay trade tax once trade income exceeds the €24,500 allowance, and much of it is then credited against income tax. Freelancers in liberal professions pay none at all.

Example: one year as a service business

Here is a compact budget for a full-time founder with no children, no employees and the small business VAT exemption:

That means earning just under €370 a month before a single euro goes towards rent or food. Standard tools are enough for bookkeeping and invoicing at the start. Custom software of the kind studios such as OnlineBuilders build only pays off once processes get genuinely large.

Keeping first-year costs down

Three levers work straight away. Starting on the side spares you health insurance as long as the business stays secondary; the rules are in the guide to starting a side business while employed. Deposits pull cash forward, as described in asking clients for a deposit. And an honest runway calculation, as in the guide to bootstrapping a business, shows whether your buffer is enough.

Your next step: open a second account today and move a quarter to a third of the profit from every client payment into it. One-off start-up costs are in the guide to registering a business in Germany.