Solo Biz Soft Editorial Team Most new freelancers pick an hourly rate by copying someone else or by dividing their old salary by 2,080 hours. Both approaches usually leave you underpaid, because a freelancer cannot bill every hour they work. This guide shows how to build your rate from the ground up.
Step 1: decide your take-home income
Write down what you want to keep each year after tax. Include what you need to live on and to save.
Step 2: add tax
Freelancers pay their own tax. Use a rough percentage from your accountant or tax authority. If you are unsure, a flat estimate is fine for planning. The calculator below uses a single figure. Divide your take-home target by (1 minus the tax rate) to find the profit you need to earn before tax.
Step 3: add business costs
Include software, equipment, insurance, a co-working desk, accounting help and anything else you pay for to run the business. Add them to the profit figure to get the revenue you need.
Step 4: add a safety buffer
Clients pay late, and some months are slow. Adding 10 to 20 percent gives you room to breathe.
Step 5: work out your billable hours
Take the weeks you actually work (52 minus holidays, sick days and quiet weeks), then multiply by the hours per week you can realistically invoice. Many freelancers bill far fewer hours than they work, because proposals, admin, emails and marketing are unpaid.
Step 6: divide
Hourly rate = required revenue ÷ billable hours per year.
A worked example
You want to take home 50,000. You estimate 25 percent tax, so you need about 66,667 in profit. Business costs are 4,000, so the pre-buffer revenue is 70,667. With a 10 percent buffer, the target is 77,733. You take six weeks off and bill 25 hours a week, so you have 46 × 25 = 1,150 billable hours. Your minimum rate is 77,733 ÷ 1,150, about 67.59 an hour.
Skip the arithmetic with our Freelance Hourly Rate Calculator. Change any number and the result updates instantly.
What to do with the result
- Treat it as a floor. Do not quote below it.
- Add a premium for rush work, difficult clients or specialist skills.
- Compare it with the market. If it is far above what clients pay, consider raising your skills, changing your niche or cutting costs.
- Use it to price projects with the Project Price Calculator.
Frequently asked questions
Should I charge the same rate for every client?
Not necessarily. Rates can vary with the type of work, the client’s budget and your workload. Keep your calculated rate as the minimum.
Why are billable hours so low?
Freelancers also spend time on sales, admin, learning and following up. A common mistake is assuming every working hour can be billed.
How often should I recalculate?
At least once a year, and whenever your costs, tax situation or goals change.
Related reading: How to Price Freelance Projects · Freelance Proposal Template
This article is general information, not legal or tax advice. Rules differ by country, so check what applies to you.