Freelance Rate Calculator

How to work out what to charge as a freelancer

Most people set their first freelance rate by taking their old salary, dividing by 2,080 hours, and adding a bit for luck. That number is always too low, because a salary was never the full cost of employing you and 2,080 hours were never billable. The honest way round is to start from the money you want to keep and work backwards through tax, overhead and the hours you can realistically invoice.

The full chain on an 80,000 target

Say you want 80,000 in your pocket, you spend 8,000 a year on software, insurance, a laptop refresh and an accountant, you set aside 25% for tax, you can bill 25 hours a week, and you take 6 weeks off.

Working weeks come to 52 − 6 = 46. Billable hours for the year are 46 × 25 = 1,150. Gross revenue has to cover income plus expenses before tax takes its cut, so (80,000 + 8,000) ÷ (1 − 0.25) = 117,333. Divide that by 1,150 billable hours and you get 102.03, which rounds up to a rate of 103 per hour. A standard eight-hour day is 824, and a monthly retainer at 160 hours with a 15% commitment discount is about 14,008.

Compare that with the naive method: 80,000 ÷ 2,080 = 38.46. The gap between 38 and 103 is not greed. It is tax, overhead, unpaid holiday, and the two-thirds of your week that nobody pays you for.

The unbillable-time reality

Nobody bills 40 hours a week for long. Proposals, invoicing, chasing late payments, calls that generate no work, marketing, bookkeeping, learning, and the gaps between projects all consume real hours. Surveys of independent consultants regularly land between 40% and 60% utilisation. Running the same 80,000 target at 20 billable hours instead of 25 lifts the required rate from 103 to 128; at 30 hours it falls to 86. Your utilisation assumption moves the rate more than any other input, so be pessimistic on purpose. If you beat it, you have a buffer instead of a shortfall.

A rate-raise playbook

Rates decay. Costs rise, your work gets better, and the number you set two years ago quietly becomes a discount. Recalculate every year with your real expense total and real billable hours from your invoicing tool, not the optimistic version. When the number moves, give existing clients 60 to 90 days' notice in writing, state the new rate once, and skip the apology paragraph — it invites negotiation. Grandfathering a long-standing client for one more project cycle is a reasonable gesture; grandfathering them forever is a pay cut you administer yourself. New enquiries go straight to the new rate from the day you decide it, which is also the cheapest way to test whether the market accepts it.

Retainers versus hourly

A retainer trades rate for predictability. The 160-hour monthly figure above applies a 15% discount because guaranteed volume and guaranteed cash flow have genuine value to you: no re-selling every month, no gap weeks, no chasing three invoices instead of one. Two rules keep retainers from turning sour. Cap the hours in writing, so "always available" does not become unlimited, and set an expiry on unused hours (usually no rollover, or one month) so a quiet month does not create a debt you owe in a busy one. If a client wants priority access rather than a set number of hours, price the availability itself — that is a different product from discounted labour.

Limitations worth knowing

This calculator gives you a floor, not a market price. It cannot see what your competitors charge, what the client's budget looks like, or what the work is worth to their revenue. A project that saves a company 200,000 a year is not priced by your hours. It also assumes an even spread of work across the year, uses a flat tax percentage where real systems are progressive, and ignores VAT or sales tax, which you collect on top and remit rather than keep. In the US, self-employment tax alone is 15.3% of net earnings before any federal or state income tax; in the UK, income tax plus Class 2 and Class 4 National Insurance drives most sole traders to a similar set-aside. Use the number here to know when a quote is losing you money, then let an accountant fix the tax figure and let the market push the price up from there.