Key takeaways
- Your rate must cover tax, business costs, unpaid admin time and time off. A salary did that before.
- Most freelancers can bill only 50–70% of their working hours.
- Use the formula to find your floor, then price on the value you deliver, not the hours.
- If you are fully booked, raise your prices for new clients.
The most common mistake new freelancers make is taking their old salary, dividing it by 2,080 working hours, and charging that. It leaves them working more for less. Here is how to find a rate that actually pays you, and then how to charge more than it.
Why your rate needs to be higher than you think
When you were employed, your employer paid for things you now pay yourself:
- Tax and social contributions that were taken from your pay or paid by the employer.
- Business costs: software, equipment, insurance, accounting, a workspace.
- Paid time off: holidays, public holidays and sick days.
- Unpaid work: finding clients, quoting, invoicing, bookkeeping, learning. This often takes a third or more of your week.
That last one is the biggest. If you work 40 hours a week, you might bill 20 to 28 of them.
The formula
Your minimum hourly rate is:
(Target take-home income ÷ (1 − tax rate) + yearly business costs) ÷ (working weeks × billable hours per week)
Where:
- Target take-home income is what you want to keep after tax.
- Tax rate is your estimated total rate on profit, including social contributions.
- Working weeks is 52 minus holidays, public holidays and an allowance for sick days.
- Billable hours per week is the time you actually charge clients for.
Use the freelance rate calculator to do the maths with your own numbers.
A worked example
Sam is a freelance designer who wants to take home 50,000 a year.
| Item | Sam’s numbers |
|---|---|
| Target take-home | 50,000 |
| Estimated tax on profit | 28% |
| Profit needed before tax | 50,000 ÷ 0.72 = 69,444 |
| Business costs (software, laptop, insurance, accountant) | 6,000 |
| Revenue needed | 75,444 |
| Weeks off (holidays, public holidays, sick days) | 7 |
| Working weeks | 45 |
| Billable hours per week | 25 |
| Billable hours per year | 1,125 |
| Minimum hourly rate | 75,444 ÷ 1,125 ≈ 67 |
The “salary” method would have given 50,000 ÷ 2,080 ≈ 24 an hour. At that rate, Sam would take home roughly a third of the goal.
That’s your floor, not your price
The formula tells you the least you can charge. What you should charge depends on:
- The value to the client. A landing page that brings in a client’s next 100 customers is worth more than the hours it took.
- Market rates. Look at what experienced people in your niche charge; specialists earn more than generalists.
- Your demand. If you’re turning work away, you’re too cheap.
Hourly, day rate or fixed price?
| Model | Good for | Watch out for |
|---|---|---|
| Hourly | Unclear scope, ongoing support | You earn less as you get faster; clients watch the clock |
| Day rate | On-site or intensive work | Agree what a “day” includes |
| Fixed project price | Clear deliverables | Scope creep: write down exactly what is included |
| Monthly retainer | Ongoing work such as bookkeeping or social media | Define hours or deliverables per month |
| Value-based | Work with a measurable business result | Needs confidence and a good conversation about outcomes |
A good path: work out your hourly floor, then quote fixed prices built on it, with a buffer for revisions.
How to raise your rates
- New clients first. Quote your new rate to every new enquiry.
- Give existing clients notice: 30 to 60 days, in writing, with the date the new rate starts.
- Don’t apologise or over-explain. “From 1 March my rate for new projects will be X” is enough.
- Add value as you go up: clearer packages, faster turnaround, better reporting.
Common pricing mistakes
- Pricing to win every job. You should lose some quotes on price; if you never do, you’re too cheap.
- Discounting to get started. Discounted first clients become the hardest to raise later. Offer a smaller scope instead of a lower rate.
- Forgetting tax. Set aside a share of every payment as it arrives (tax set-aside calculator).
- Unpaid scope creep. Write down what is included; extra work is a new quote.
Once your rate is set, send professional invoices with clear terms. Our free invoice generator creates a PDF in a minute.
Free tools for this
Freelance rate calculator
Work out the hourly and day rate you need from your income goal, costs, tax and time off.
Open the toolFree invoice generator
Fill in, preview and download a professional PDF invoice. No sign-up, nothing leaves your browser.
Open the toolTools mentioned in this guide
FreshBooks
Invoicing, expenses and time tracking made for freelancers and small service businesses.
Visit FreshBooks →Frequently asked questions
How do I calculate my freelance hourly rate?
Add your target take-home income to your yearly business costs (after allowing for tax), then divide by the hours you can realistically bill in a year, which is your working weeks times your billable hours per week. Our freelance rate calculator does this for you.
Should I charge hourly or per project?
Hourly is simplest when the scope is unclear. Fixed project prices reward you for working efficiently and are easier for clients to approve, so most experienced freelancers move to project or package pricing.
How often should I raise my rates?
Review them at least once a year, and whenever you are consistently fully booked. Raise prices for new clients first, then give existing clients notice.
This guide is general information, not legal, tax or financial advice. Some links may earn us a commission at no extra cost to you; it never changes what we recommend. How we earn.