Freelance Hourly Rate Calculator
The rate that actually reaches your target income, once unbillable time, holiday, tax and business costs are all counted.
In short
To set a freelance rate, divide your target income plus business costs and tax by your billable hours, not your working hours. Most freelancers bill only 50 to 60 percent of their time, so a 50,000 target on 1,000 billable hours needs a rate near 75 to 90 an hour, not 25.
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The calculation
revenue needed = (target income ÷ (1 − tax rate)) + business costs + pension
billable hours = (hours per week × working weeks) × billable percentage
rate = revenue needed ÷ billable hoursTwo things in there account for nearly all underpricing: dividing by billable hours rather than working hours, and grossing up for tax rather than treating the target as revenue.
Why billable hours are the whole game
A full-time employee works about 1,700 hours a year after holiday and is paid for all of them. A freelancer works a similar number and gets paid for perhaps 1,000.
The missing 700 hours are not idleness. They are pitching, quoting, contract negotiation, invoicing, chasing late payment, bookkeeping, tax returns, updating a portfolio, marketing, learning new tools, and the dead weeks between one project ending and the next starting.
All of that is real work that produces no invoice, and it has to be paid for by the hours that do. A freelancer billing 60% of their time needs a rate roughly 1.7 times higher than the naive calculation to reach the same income.
If you are new, assume 50%. If you have a stable base of repeat clients, 65% is realistic. Above 75% is achievable only with an agency or an agent doing the finding for you, and even then not for long.
What your old salary really cost your employer
The instinct to take a previous salary and divide by 2,000 is understandable and produces a number far below cost. The salary was never the total.
- Paid holiday and public holidays. Typically five to six weeks, around 11% of the year, paid.
- Sick leave. Paid. As a freelancer, an illness costs you the day twice: no income and a slipped deadline.
- Employer pension contributions. Commonly 3% to 10% of salary, on top.
- Employer taxes. In many countries an additional 10% to 20% of salary that you never saw on a payslip.
- Equipment, software, desk, insurance, training. Provided.
- Downtime. Employees are paid during quiet weeks. Freelancers are not.
Added together, an employee on 40,000 typically costs an employer 55,000 to 65,000, and that is before the unbillable time. This is why a freelance rate that looks outrageous next to an hourly salary equivalent is frequently just correct.
The floor, not the price
The number this produces is a floor. It is the rate at which you break even against your own target, and it contains no profit, no growth and no margin for a bad year.
What you actually charge should sit above it, and the gap is determined by things this calculation cannot see: how scarce your skill is, how much the work is worth to the client, how much risk you are absorbing, and how badly they need it done by Friday.
Value-based pricing is the version of this taken to its conclusion. If a piece of work will earn a client 200,000, the hours it takes you are close to irrelevant to what it is worth. Hourly pricing is a floor and a sanity check, not a philosophy.
Quote projects, price in hours
Clients dislike open-ended hourly billing because it transfers all the risk to them, and they are right to. It also punishes you for getting faster, which is a strange incentive to build into your own business.
Estimate the hours, apply your rate, add a contingency of 20% or so for the parts that always take longer, and quote a single project figure. You keep the upside of working efficiently, and the client gets a number they can approve.
State clearly what the price includes and how many rounds of revision. Almost every freelance project that goes badly goes badly at that boundary rather than on the rate.
Raising your rate
Rates do not drift upward on their own. Inflation alone means a rate held for three years is a real-terms cut of around 10%.
The lowest-friction approach is to raise the rate for new clients first and leave existing ones for a cycle. You find out whether the new number holds without risking your base. If new clients accept it without hesitation, the number was probably still too low.
When you do raise existing clients, give notice, do it at a natural boundary such as a new project or a new year, and state it as a fact rather than a request. Most clients accept a reasonable increase from someone they already trust, because replacing you costs them more than the difference.
Frequently asked questions
How do I work out my freelance hourly rate?
Add your target take-home income, your business costs and the tax you will owe, then divide by your billable hours rather than your working hours. The second half is where most people go wrong: billable hours are typically only half to two thirds of the time you actually work.
How many hours can I actually bill?
Most established freelancers bill between 50% and 65% of their working time. The rest goes on finding work, quoting, invoicing, admin, learning and the gaps between projects. Assuming you will bill 40 hours a week is the single most common cause of underpricing.
Is a freelance rate just my old salary divided by 2,000?
No, and that calculation typically lands 60% to 100% too low. An employer paid for your holiday, sick leave, pension, employer taxes, equipment, software and training on top of your salary. As a freelancer all of that comes out of your rate, and you bill far fewer hours.
Should I charge by the hour or by the project?
Quote by project, price by hour. Clients prefer a fixed number and it removes the perverse incentive to work slowly, but you still need an hourly figure to know whether a project price is sane. Work out the hours, multiply, then quote the total.
What if my rate comes out higher than the market?
Then either the market is paying below sustainable rates, which happens in crowded fields, or your assumptions are off. Check your billable percentage and your target income first. If the number is genuinely right and the market will not pay it, the answer is usually to change who you sell to rather than to accept a loss-making rate.
Does this include tax?
It applies a single effective rate that you set, covering income tax and self-employment or national insurance contributions together. Real tax systems have bands, allowances and deductible expenses, so treat the result as a planning figure and speak to an accountant before filing anything.