How to calculate your freelance hourly rate

The rate you charge has to cover four things: the take-home pay you want, the tax on it, your business costs, and all the hours you work but can’t bill. Most people only account for the first.

Step 1: pick your take-home pay

Start with what you want to keep after tax in a year. If you left a job, your old net salary is a reasonable start. Remember you now also need to fund your own holidays, sick days and pension, which an employer used to cover.

Step 2: gross it up for tax and savings

If you set aside 30% for tax and 10% for a buffer, you keep 60% of profit. So to keep 50,000, you need a profit of 50,000 ÷ 0.60 = 83,333.

Step 3: add your business costs

Software, hardware, insurance, phone, coworking, an accountant, training. Say 6,000 a year. Revenue needed: 83,333 + 6,000 = 89,333.

Step 4: count the hours you can actually bill

This is where most estimates go wrong. Take 8 weeks off for holidays, illness and quiet periods, and you have 44 working weeks. At 5 days and 8 hours, that’s 1,760 hours. But not every hour is billable: email, invoicing, finding clients and admin take a big share. At a 60% billable share you have about 1,056 billable hours.

Step 5: divide

89,333 ÷ 1,056 = about 85 per hour, or about 680 per day.

Compare that with the naive approach of 50,000 ÷ 2,080 hours, about 24 per hour. The realistic rate is more than three times higher. That’s why freelancers who price from their old salary often feel busy and broke at the same time.

Try your own numbers in the free rate calculator.

Then sanity-check against the market

Your calculated rate is your floor. Check it against what others in your field and region charge. If the market rate is far below your floor, you have three levers: specialise in a niche that pays more, raise your billable share, or cut costs.

Day rates and project prices

Many freelancers quote by the day or by the project rather than by the hour. To price a project, estimate the hours, multiply by your rate, then add a 10–20% buffer for revisions and scope creep. Clients compare totals, not hours, so a clear fixed price often wins.

Review it every year

Costs rise and your skills grow. Recalculate each year and raise your rate for new clients first. Once you’re tracking real income and expenses, you can replace your estimates with actual numbers.