From Year of Assessment (YA) 2027, self-employed people and individual sole proprietors with revenue of up to S$50,000 can deduct a flat 20% of their revenue as business expenses, instead of adding up actual receipts. This fixed expense deduction ratio is optional.
It applies to income earned in 2026, filed in 2027. IRAS has published the conditions, and the Ministry of Finance (MOF) set out the details in the Finance (Income Taxes) Bill 2026, which went to its second reading in Parliament on 6 October 2026.
What the Fixed Expense Deduction Ratio Is
Self-employed people are taxed on revenue minus allowable business expenses. Normally that means keeping and totalling receipts for every expense.
A fixed expense deduction ratio (FEDR) replaces that with a set percentage. IRAS already uses industry-specific ratios:
- private-hire car and taxi drivers, since YA 2019
- commission agents, at 25% of gross commission, since YA 2020
- delivery workers, since YA 2024
The new broad-based ratio covers everyone else: freelance designers, tutors, home bakers, photographers and other sole proprietors whose income is not covered by those three groups.
The short version: From YA 2027, if your self-employment revenue is $50,000 or less, you can deduct 20% of it without itemising. Claim actual expenses instead if they are higher.
Who Qualifies for the 20% Ratio
According to IRAS’s FEDR page, MOF’s consultation papers and the Second Reading speech:
| Condition | Detail |
|---|---|
| Who | Self-employed persons and individual sole proprietors |
| Revenue | Gross income of up to $50,000 a year from each type of business |
| Expenses | You must have incurred allowable business expenses |
| Income covered | Income not already covered by an industry-specific FEDR |
| Ratio | 20% of revenue |
| From | YA 2027 (income earned in 2026) |
| Choice | Optional; actual expenses can still be claimed |
Opening the Bill’s second reading in Parliament, MOF described it as “an option and is not compulsory”, adding that those who prefer to claim actual expenses may continue to do so.
Worked Example: Is 20% More Than Your Receipts?
Illustration only. A freelance tutor earns $40,000 in fees in 2026 and has no other income. Her actual allowable expenses, mainly teaching materials and transport, come to $3,000.
| Actual expenses | 20% ratio | |
|---|---|---|
| Revenue | $40,000 | $40,000 |
| Expenses deducted | $3,000 | $8,000 |
| Net trade income | $37,000 | $32,000 |
| Less Earned Income Relief | $1,000 | $1,000 |
| Chargeable income | $36,000 | $31,000 |
| Tax (YA 2024 onwards rates) | $410 | $235 |
The ratio saves her $175 in tax, before other reliefs such as relief on compulsory MediSave contributions. She also no longer needs to total up every receipt.
Now take a home baker with the same $40,000 revenue but $14,000 of ingredients, packaging and equipment upkeep. Her actual expenses are 35% of revenue, so claiming them gives the bigger deduction. The 20% ratio would raise her tax.
How It Fits With Filing
Self-employed people must file if their net self-employment profit is more than $6,000 or their total income is more than $22,000. IRAS asks those with revenue of $200,000 or less to fill in a 2-line statement: revenue and adjusted profit or loss.
The ratio changes only how the expense figure is worked out. You still declare your full revenue. IRAS says the ratio is applied automatically when you e-file; to claim actual expenses instead, you opt out and enter them, and you can choose each year. IRAS asks self-employed people to keep business records for at least five years.
Our guide to income tax for the self-employed covers allowable expenses, MediSave and filing in more detail, and CPF for the self-employed explains the MediSave side.
What It Does Not Change
- Your tax rates. Business income is added to your other income and taxed at the resident rates in our guide to how income tax works.
- Your reliefs. Earned Income Relief, MediSave relief and the others apply as before, within the $80,000 cap.
- The industry ratios. Drivers, commission agents and delivery workers keep their existing ratios.
What To Do Next
- Add up your 2026 business expenses now and compare them with 20% of your revenue.
- Keep your records for five years either way, as IRAS requires.
- Estimate your tax with our income tax calculator.
- Check IRAS’s FEDR page for its filing instructions before you file in 2027. For mixed or complex income, ask IRAS or a qualified tax professional.
