The formula
- Target take-home pay for the year.
- Add business costs: software, equipment, insurance, workspace, training.
- Add an allowance for tax and social contributions.
- Add a buffer for slow months, say 5–10%.
- Divide by billable hours, not working hours.
Billable hours are fewer than you think
Start with 52 weeks, subtract holidays, public holidays and sick days, and then remember that admin, marketing, quoting and learning are unpaid. Many freelancers bill 50–70% of their working time. That makes your effective rate higher than a salary-equivalent figure.
A worked example
Suppose you want 50,000 of take-home pay, expect 8,000 of costs, set aside 25% for tax on profit, and bill 1,100 hours a year. Profit needed before tax: 50,000 ÷ 0.75 ≈ 66,667. Add costs: 74,667. Divide by 1,100 hours: about 67.9 an hour. Round up and test it against the market. Run your own numbers in the hourly rate calculator and convert to a day rate with the day rate calculator. These figures are an illustration, not market data.
Hourly, day or project pricing
| Model | Pros | Cons |
|---|---|---|
| Hourly | Simple, fair for unclear scope | Rewards slowness, punishes speed |
| Day rate | Easy to plan and compare | Needs defined days |
| Project fee | Rewards efficiency, easy for clients | Needs a tight scope and change orders |
| Retainer | Predictable income | Needs boundaries on hours |
Raising your rates
Review your rates every year. Give existing clients notice of at least 30 days, and apply the new rate to new work. If every client says yes immediately, you were too cheap.
Frequently asked questions
Should I charge differently for different clients?
You can, based on scope, urgency and value, but be consistent and transparent.
What if clients push back?
Offer a smaller scope rather than a lower rate.
Should the rate include tax?
Your rate should cover your tax allowance. Whether you add VAT or GST on top depends on your registration. See the country guides.
How many billable hours should I assume?
1,000 to 1,400 a year is a common planning range for full-time freelancers. Use your own data.
Related topics
- freelance rate
- hourly rate
- day rate
- how much to charge
- project pricing
- billable hours
- freelance pricing