Calculators
Freelance Hourly Rate Calculator
The rate people first pick is the one they get from dividing a salary by the hours in a working year. It is almost always too low, because it quietly assumes no tax, no costs and no unbillable time. This works backwards from what you want to take home to what you actually have to charge.
By Arshad Hossain · Published
The short version
- Dividing a target salary by 2,080 hours understates the rate badly.
- Roughly half of a full-time week is unbillable once selling and admin are counted.
- Gross up for tax first, then add business costs, then divide by billable hours.
- The output is a floor, not a price. What the work is worth is a separate question.
Freelance hourly rate calculator
Why dividing a salary by 2,080 fails
A salaried job pays for 2,080 hours a year including the hours spent in meetings, on holiday and off sick. Freelance work pays only for hours a client agrees to be billed for, and those are a fraction of the hours you work.
A realistic figure for sustained freelance work is 20 to 30 billable hours a week. The rest goes on finding work, quoting, invoicing, chasing payment, admin, and the unpaid learning that keeps you sellable. Someone billing 25 hours across 46 working weeks has 1,150 billable hours a year — barely more than half of 2,080.
The order the sum has to happen in
Start with the take-home figure you want, because that is the only number you actually care about. Gross it up for tax: if your effective rate is 28%, divide by 0.72 rather than adding 28%, which would leave you short.
Then add the annual cost of running the business — software, hardware, insurance, accountancy, workspace, devices, subscriptions. These come out of revenue before anything reaches you. Finally divide the result by your billable hours to get the rate.
- Take-home target ÷ (1 − tax rate) = gross profit needed
- Gross profit + annual business costs = revenue you must bill
- Revenue ÷ (billable hours per week × working weeks) = hourly rate
What the number is and is not
The output is a floor. It tells you the rate below which the arrangement does not deliver the income you set out to earn, which is genuinely useful — most underpricing is not a negotiation failure but an arithmetic one.
It is not a price. What a client will pay depends on the value of the outcome, what alternatives cost them, and how visible your work is to whoever signs off. Plenty of freelancers can charge well above their floor, and the ones who do generally moved to project pricing rather than raising an hourly figure.
Sanity-checking the result
Multiply the rate by eight for a day rate and see whether it reads as plausible for your market. If it looks high, the usual cause is an optimistic billable-hours figure rather than an inflated target — try the sum again at 20 hours a week.
Test it against a bad year as well as a good one. A rate that only works at 30 billable hours a week is a rate that fails the moment a client pauses a project, and that happens to everyone.
Setting a freelance rate: common questions
How do I calculate my freelance hourly rate?
Divide your target take-home by one minus your tax rate, add your annual business costs, then divide by your realistic billable hours for the year. Billable hours, not hours worked — that distinction is what makes the difference.
How many billable hours should I assume?
Between 20 and 30 a week for most freelancers working full time. Selling, quoting, invoicing, admin and learning consume the rest. Assuming 40 produces a rate that looks fine on paper and leaves you short every year.
Should I charge hourly or by project?
Hourly is easier to justify and caps your upside, because working faster earns you less. Project pricing rewards speed and expertise but needs a scope you can defend. Most freelancers start hourly and move to project pricing as their estimates improve.
How do I raise my rate with existing clients?
Give notice, apply it from a clear date, and do not justify it at length. One or two sentences stating the new rate and when it starts is enough. Raising it for new clients first gives you evidence the market accepts it.
Should my day rate be eight times my hourly rate?
That is the usual starting point, though many freelancers discount a booked day slightly because it removes the scheduling gaps that make short engagements inefficient. If you discount, be deliberate about it rather than defaulting to it.
Frequently Asked Questions
What tax rate should I enter?
Should I include a pension or retirement contribution?
Does this work for agencies?
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