Work out the hourly rate you need to charge to hit your income target — after expenses and tax.
Freelancers can't bill 40 hours a week — admin, sales and downtime eat into it. And unlike an employee, you pay your own expenses and tax. So:
rate = (target_income + expenses) ÷ (billable_hours_per_week × weeks) ÷ (1 − tax%)
The tax buffer grosses the rate up so that what's left after tax still hits your take-home target.
Dividing a salary by 2,080 hours produces a number that looks like a rate and is not one. An employer pays for things that come out of a freelancer's own pocket:
| Cost | Employee | Freelancer |
|---|---|---|
| Paid holiday and sick leave | Included | Unpaid — every day off is unbilled |
| Employer tax and social contributions | Paid by employer | Paid by you, often at a higher combined rate |
| Pension, insurance, healthcare | Frequently subsidised | Entirely yours |
| Hardware, software, workspace | Provided | A business expense you fund |
| Sales, admin, invoicing, chasing payment | Someone else's job | Unbillable hours you still work |
This is why an hourly rate that looks high next to a salary often maps to a similar, or lower, take-home figure.
Full-time employment is 40 hours a week; freelancing is not 40 billable hours a week. Time goes into proposals, client calls that never convert, invoicing, chasing late payment, bookkeeping and keeping skills current. Twenty-five to thirty billable hours in a good week is realistic for solo work, and assuming more produces a rate that only works if nothing ever goes quiet.
Utilisation also arrives unevenly. A month at full capacity followed by a month at half is normal, and the rate has to survive the average rather than the best month.
Hourly is safest for open-ended work with unclear scope, and it caps your upside — getting faster earns less. Daily rates reduce the accounting and discourage clients from buying an hour here and there. Fixed price pays for the outcome instead of the time, which rewards efficiency and expertise, but every unbounded revision comes out of your margin. Fixed price only works with scope written down.
Holidays, sick days and gaps between clients. 46 weeks assumes ~6 weeks off. Lower it to be safe.
Yes — this is your floor. Charge below it and you're losing money once tax and unbilled time are counted.
Commonly, yes, and the honest reason is cost of service rather than what a client can bear. Long approval chains, mandatory tooling, security reviews and meeting-heavy processes consume real hours. A rate that works for a two-person startup can be a loss on an enterprise engagement with the same nominal scope.
With notice and a date, applied to work starting after it — not retroactively, and not as a negotiation. Existing clients are usually the ones paying the oldest rates, so the alternative to raising them is doing your worst-paid work for the people you work with most.