Work out the minimum hourly and day rate you need to charge as a freelancer or contractor to earn the income you want after costs and tax.
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How the rate is worked out
- Start with the take-home income you want.
- Gross it up for tax: £40,000 after 25% tax needs £53,333 of profit.
- Add business costs, such as software, equipment, insurance and an accountant.
- Divide by the hours you can actually bill, after holidays, sick days and admin.
Worked example
You want £40,000 take-home, have £4,000 of costs and lose about 25% to tax. That’s £57,333 of revenue. With 6 weeks off and 65% of a 37.5-hour week billable, you have about 1,121 billable hours, so your minimum rate is £51 an hour, or about £384 a day.
Why freelancers charge more than employees
An employee on £40,000 also gets paid holiday, sick pay, pension contributions and equipment. As a freelancer you cover all of these yourself, and most people can bill only 50% to 70% of their working time. That’s why a common rule of thumb is to charge at least 1.5 to 2 times the hourly rate of an equivalent salaried job.
Tips
- Track your real billable hours for a month before setting rates.
- Quote day or project rates for larger jobs to avoid being judged on hours.
- Review your rates every year, and raise them for new clients first.
Frequently asked questions
How do I calculate my freelance rate?
(Take-home income ÷ (1 − tax rate) + business costs) ÷ billable hours a year.
How many billable hours should I assume?
Most freelancers bill 50% to 70% of their working time. The rest goes on admin, sales and unpaid tasks.
What's a good day rate?
It depends on your field and market. The calculator gives your minimum; check what others with similar skills charge.
Should I charge hourly or by project?
Project or day rates often work better once you can estimate jobs well, because you’re paid for value rather than time.
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