Freelance hourly rate calculator

How the freelance rate calculator works

Most freelancers set their first rate by dividing a salary they used to earn by 2,080 (40 hours × 52 weeks). That number is almost always too low. An employee's salary does not have to cover software, equipment, insurance, an accountant, holidays, sick days, or the hours spent on sales, admin and invoicing. Your rate does.

This calculator works backwards from what you want to keep. Enter your target take-home income, your yearly business costs and the share of profit you set aside for tax. Then enter how many weeks a year you will not work and how many hours a week you do work. The last input, utilisation, is the share of those working hours you can actually bill. It turns a salary-shaped number into a sustainable rate. The calculator gives you three numbers: an hourly rate, a day rate for an 8-hour day, and the monthly retainer that adds up to the same yearly revenue.

The formula

Two details matter. First, tax is grossed up on profit, not on revenue. In most countries business expenses are deductible, so reserving tax on them would make you more expensive than you need to be. Second, the tax reserve is a planning percentage, not a tax calculation. Use the effective rate your accountant gives you, or your country's income tax plus social contributions on your expected profit. Our freelance taxes and finance guide explains how to estimate it.

Worked example

A UX consultant wants to take home 60,000 a year. Their business costs are 8,000 a year (laptop replacement, software, insurance, accountant). They reserve 25% of profit for tax. They take 6 weeks off for holidays, public holidays and sick days, work 40 hours a week, and can bill 60% of that time. The rest goes on sales calls, proposals, admin and learning.

The naive "salary ÷ 2,080" method gives 60,000 ÷ 2,080 = 28.85 an hour, about a third of the sustainable rate. Charge that and the consultant would end the year with roughly 32,000 of revenue at 60% utilisation, before tax and costs.

Choosing a realistic utilisation

Utilisation is the input people get most wrong, and it moves the result more than any other. As a rough guide:

• 50–60% for most solo freelancers who find their own clients, write proposals and do their own bookkeeping.
• 65–75% if most of your work comes from a few long-term clients or a retainer, so you spend little time selling.
• Below 50% in your first year, or if you are building a portfolio or product alongside client work.

If you track time, use last quarter's real figure: billable hours ÷ total hours worked. Knowing where the non-billable hours go is often the quickest way to raise utilisation. Batching admin into one afternoon, using templates for proposals and sending invoices from the same place you track time all give hours back.

Common mistakes when setting a freelance rate

1. Using 52 working weeks. Even without a holiday you lose public holidays and sick days. Six weeks off is a sensible floor.
2. Assuming 100% utilisation. Nobody bills every hour they work. Admin, sales and invoicing are real work that clients do not pay for directly.
3. Forgetting expenses that come round once a year: insurance, professional memberships, conference tickets and a new laptop every three years.
4. Treating the result as a price. The calculator gives you a floor, the least you can charge and still meet your target. Your market price can and often should be higher.
5. Never revisiting it. Re-run the numbers each year, and whenever your costs or tax position change.

Turning the number into invoices

Once you have a rate, write it into your proposals and contracts, and bill it consistently. For time-based work the hourly invoice template shows the hours, rate and total on each line. For ongoing work the retainer invoice template bills the monthly figure and the hours it covers. You can create either of them now with our free invoice generator . When you are ready to stop doing this by hand, COLO invoicing and payments turns tracked time into invoices, and COLO finance shows whether you are on track for the yearly revenue this calculator gave you.