How to use the Freelance Rate
- Enter the annual income you want to take home.
- Add annual business costs: software, equipment, insurance, accounting, workspace.
- Enter your realistic billable hours per week and weeks worked per year.
- Read the required rate and sanity-check it against your market.
How the calculation works
The calculation works backwards from take-home pay. Target income plus business costs plus self-employment tax and any pension or health provision gives total revenue required. That is divided by billable hours only — realistically 55 to 70% of working hours once sales, admin, invoicing and unpaid holiday are removed. A 40-hour week rarely yields more than 25 billable hours.
This is why a freelance rate cannot be derived by dividing a salary by 2,080. An employer absorbs paid leave, sick pay, employer tax contributions, pension, equipment and the cost of idle time between projects. A freelancer prices all of that into the rate, which typically means charging somewhere between 1.5 and 2.5 times the hourly equivalent of a comparable salary.
Rate = (target income + overhead + tax + benefits) / (billable hours per week × weeks worked)Source: Standard cost-plus pricing method for independent contractors; utilisation ranges per common professional-services benchmarks.
Worked example
A designer wants 62,000 take-home, has 7,400 of annual costs, bills 24 hours a week and works 46 weeks.
- Allow 27% for self-employment tax and pension: 62,000 / 0.73 = 84,932.
- Add overhead: 84,932 + 7,400 = 92,332 revenue required.
- Billable hours = 24 × 46 = 1,104.
- Rate = 92,332 / 1,104 = 83.63.
About 84 per hour, or roughly 670 a day — versus the 30 per hour a 62,000 salary implies on paper.
Frequently asked questions
Why is my freelance rate so much higher than a salaried equivalent?+
Because you are funding what an employer would otherwise provide: paid leave, sick pay, pension, employer tax contributions, equipment, insurance and the unbillable hours spent finding work.
How many hours a week can I realistically bill?+
Most established freelancers bill 20 to 30 hours in a full working week. Sales, proposals, invoicing, admin and professional development consume the rest, and pretending otherwise underprices the work.
Should I quote hourly or per project?+
Project pricing usually earns more once you are efficient, because the client buys an outcome rather than your time. Calculate the hourly rate anyway — it is how you check a fixed price is worth accepting.
How often should I raise my rate?+
Review annually and with each significant capability gain. Costs and inflation rise continuously, so a rate held flat for three years is a real-terms pay cut.
Last reviewed August 31, 2026. We review this page whenever the underlying formula, tax year, published rate or standard changes.