Productivity
Work backwards from your target income, billable hours, holidays and business costs to the hourly rate you need to charge.
Overview
This free hourly rate calculator works backwards from the life your rate has to fund. Enter the take-home income you want, what you set aside for tax, your annual business costs and how much of your time you can actually invoice, and it shows the rate that adds up.
Almost every rate that turns out to be too low is too low for the same reason: it was calculated on the wrong hours. A working year contains around 2,000 hours, and a freelancer bills nowhere near all of them. Holidays, admin, quoting, invoicing, chasing payment, marketing and the gaps between projects come out first, and what is left is what a client pays for.
That is why the comparison underneath the result is always on screen rather than hidden behind a toggle. Billing 65% of your hours instead of 100% is not a detail — it raises the rate you need by more than half. Seeing that makes the assumption a decision instead of something that quietly happens to you.
Nothing is uploaded. Your income target and your cost base are calculated in your browser and never transmitted, which is worth knowing before typing your finances into anything.
Step by step
Enter the take-home income you want for a year, after tax, and the share of profit you set aside for tax.
Include annual business costs, and the weeks you will not be working — holiday, public holidays and expected sick leave.
Set the share of your working hours you can actually invoice. The comparison underneath shows what the rate becomes at every other assumption.
Background
The obvious way to price is to take the salary you want, divide by a working year, and charge that. It produces a number that feels reasonable and is usually a substantial pay cut, because a salary is the smallest part of what an employer actually spends on an employee.
Everything an employer quietly pays for now comes out of your rate. Paid holiday and public holidays. Sick leave. Employer taxes and pension contributions. A laptop, software licences, a phone, insurance, an accountant. Training, and the hours spent on it. None of that disappears when you go independent; it moves onto your invoice, or it comes out of the income you were trying to protect.
Then there are the hours themselves. An employee is paid for every hour they are at work, including the meeting that achieved nothing and the morning spent on internal admin. A freelancer is paid only for hours a client agrees to buy. Time spent quoting for work you do not win, writing invoices, chasing late payment, doing your books and finding the next project is all real work and none of it is billable.
This is what the billable percentage represents, and it is the number people get most wrong. Many independents bill somewhere between 50% and 70% of their available hours. The arithmetic is unforgiving: at 65%, you need roughly one and a half times the rate you would need at 100% to reach the same income. Pricing as though every hour sells is the single most expensive assumption in freelancing.
One smaller trap sits inside the tax step. Grossing up by adding the tax percentage undershoots, because tax is then charged on the larger figure. If tax takes 30%, the profit needed to keep 70,000 is 70,000 ÷ 0.7 — one hundred thousand — not 70,000 plus 30%, which is ninety-one thousand and leaves you nine thousand short.
Reference
Each of these moves the rate, and the ones people leave out are consistently the ones that make it too low. The defaults are a starting point, not a recommendation — the honest version of each figure is your own.
Target take-home income
What you want to keep for the year, after tax. Working backwards from this rather than forwards from a plausible-sounding rate is the whole method, because it is the only way to find out whether the rate is actually enough.
Required
Tax set-aside
The share of profit going to income tax, social contributions and anything else assessed on your earnings. Divide to gross up rather than adding the percentage, or you finish short by the amount tax is charged on.
Required
Billable percentage
The share of working hours a client actually pays for. The most influential input on the page, and the one worth measuring rather than guessing — the difference between 60% and 80% is the difference between two very different businesses.
Required
Weeks not worked
Holiday, public holidays and the sickness you should plan for. Nobody pays a freelancer for these, so they shorten the year the rate has to be earned in. Five weeks of holiday plus public holidays and a little sickness is a realistic seven or eight.
Required
Business costs
Software subscriptions, professional insurance, accountancy, equipment, a phone, a workspace, professional memberships. Individually small and collectively significant, and every one of them has to be earned before you take anything home.
Optional
Hours a week
The hours you intend to work, not the hours you could. Setting this to fifty because you are prepared to work fifty prices a rate that requires you to keep doing so — which is a decision worth making on purpose.
Optional
Hours a day
Used to turn the hourly rate into a day rate. Seven or eight is typical; using a longer day quietly lowers your effective hourly rate on every day-priced engagement.
Optional
Unpaid and written-off time
Work done outside scope, rework absorbed rather than charged, and invoices settled late or not at all. If this is a regular feature of your year, it belongs in the billable percentage rather than in your optimism.
Optional
What you are not funding here
Pension contributions, saving for equipment replacement, parental leave and time between clients are all real and none are automatic. If they matter, they belong in the take-home target or the costs rather than being hoped for.
Optional
Who it helps
The first rate anchors everything that follows, and raising it later with existing clients is far harder than starting correctly. Working backwards from what the year has to produce takes ten minutes and prevents a mistake that compounds for years.
The instinct is to convert a salary into an hourly figure and add a bit. That figure is almost always too low, because it prices none of what the employer was paying separately and assumes every hour sells. This is the calculation that shows the gap.
A rate is only comparable once utilisation is accounted for. Six guaranteed months at a lower rate can beat a higher rate on intermittent work, and the only way to see that is to run both through the same hours.
Charge-out rates have to cover salary, employer costs, overhead and the fact that nobody is billable all day. The same arithmetic applies with an extra layer, and getting utilisation wrong across a team multiplies the error.
Constant work and disappointing income usually means the rate assumes a utilisation that never happens. Putting your real billable share into the calculation tends to explain the whole thing in one number.
A rate increase is much easier to hold when it is the output of an arithmetic you can explain. Costs, time off and billable hours are facts about the work rather than opinions about your worth, and they make the conversation a different one.
Do it properly
Starting with what the year has to produce is the only way to know a rate is sufficient. Starting with what others charge tells you about the market, which matters, but it cannot tell you whether the number covers your life.
Track your actual hours for a couple of months and compare billed against worked. Almost everyone guesses high, and because this is the most influential input on the page, guessing high is what makes rates too low.
To keep a given amount after tax at rate t, divide by (1 − t) rather than adding t. Adding the percentage leaves you short by exactly the amount tax is then charged on — the same error as removing VAT by subtracting.
Holiday, public holidays and sickness are unpaid when you are independent, so they shorten the year the rate has to cover. Planning for five weeks and taking eight means the rate was calculated for a year that did not happen.
Subscriptions, insurance, accountancy and equipment are individually forgettable and collectively large. Each one must be earned before anything reaches you, so leaving them out understates the rate by their whole value.
It tells you what your costs and time require, not what your work is worth. Charge above it where the value justifies it, and treat anything below it as a decision you are making knowingly rather than one you have drifted into.
Costs rise, tax changes, and your billable share moves as the business matures. A rate set three years ago was calculated for a business that no longer exists, and rates do not update themselves.
Avoid these
Dividing your target income by a full working year
Divide by billable hours, not available ones. Around 2,000 hours are worked and far fewer are sold — at a 65% billable share, the rate you need is roughly one and a half times the one that calculation gives you.
Converting a salary straight into an hourly rate
Add back everything the employer paid separately: holiday, sick leave, pension, employer taxes, equipment, software, insurance and accountancy. A freelance rate matching a salaried hourly figure is a large pay cut in disguise.
Adding the tax percentage instead of dividing by what is left
To keep 70,000 at a 30% tax rate you need 100,000 of profit, not 91,000. Adding 30% leaves you nine thousand short, because tax is charged on the grossed-up figure rather than the original one.
Forgetting that holidays and sickness are unpaid
Take the weeks off out of the year before dividing. Every week you do not work is a week the rest of the year has to carry, and pricing on 52 weeks quietly assumes you never stop.
Leaving business costs out because they feel small
Total them for a year and put the figure in. Software, insurance, accountancy and equipment routinely reach several thousand, all of which has to be invoiced before a single unit of it is yours.
Discounting a day rate below the hourly equivalent out of habit
Make it a deliberate decision. A discount for guaranteed days can be sound commercially, but applied automatically it silently lowers your effective rate on exactly the engagements that fill most of your calendar.
Setting a rate once and never revisiting it
Recalculate annually. Costs rise, tax rules change and your billable share shifts, and a rate that worked three years ago is now funding a different business with different numbers.
FAQ
The Hourly Rate Calculator is at the top of this page — free, no signup, nothing uploaded.
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