Key takeaways
- Divide yearly revenue needed (income ÷ (1 − tax) + expenses) by billable hours.
- Most freelancers bill 20–30 hours a week, not 40.
- The result is your minimum rate, so add a margin for slow months.
How the freelance rate calculation works
Employees get paid holidays, a pension contribution and equipment from their employer. Freelancers pay for all of that themselves, and they cannot bill every hour they work. A good freelance rate therefore starts from the income you want to keep and works backwards through tax, expenses and the hours you can realistically sell.
The result is your minimum rate: the price at which you hit your income goal if you stay fully booked. Most freelancers add a margin on top for slow months, late-paying clients and future growth.
Typical inputs by country
| Input | Common range | Notes |
|---|---|---|
| Billable hours per week | 20–30 | Lower when you are building a client base |
| Weeks off per year | 5–8 | Vacation + public holidays (US about 11 days, UK 8, Canada 9–10, Australia 7–8) + sick days |
| Effective tax rate (US) | 20%–35% | Federal + state income tax + 15.3% self-employment tax on most profit |
| Effective tax rate (UK) | 20%–35% | Income tax + Class 4 National Insurance |
| Business expenses | 5%–15% of revenue | Software, hardware, insurance, accountant, health cover (US) |
These ranges are general guidance, not tax advice. Your effective rate depends on your country, state or province, deductions and business structure, so ask an accountant for your own figure.
A worked example
A freelance designer wants to take home $60,000 a year. They expect $6,000 of expenses, a 25% effective tax rate, 25 billable hours a week and 6 weeks off.
- Profit before tax: $60,000 ÷ 0.75 = $80,000
- Revenue needed: $80,000 + $6,000 = $86,000
- Billable hours: 25 × 46 = 1,150
- Hourly rate: $86,000 ÷ 1,150 = $74.78
- Day rate (8 h): $598.26 · Monthly target: $7,166.67
The same income at 40 billable hours a week would suggest only $46.74 an hour. If only 25 hours a week actually get billed, that rate brings in about $32,000 less revenue than the designer needs.
Tips for setting your rate
- Charge by value when you can. If your work earns a client $50,000, a $5,000 project is easy to justify whatever the hours.
- Raise rates for new clients first. Test a higher rate on new enquiries and move existing clients up once a year.
- Keep a buffer. Aim for three to six months of expenses in savings so a quiet month does not push you into underpricing.
- Use minimums. A minimum project fee or day rate stops small jobs from eating your week.
Frequently asked questions
How do I calculate my freelance hourly rate?
Add your target take-home pay, grossed up for tax, to your yearly business expenses. Then divide by the hours you can actually bill in a year.
Example: $60,000 take-home at a 25% tax rate needs $80,000 of profit. Add $6,000 of expenses and you need $86,000 of revenue. At 25 billable hours a week for 46 weeks (1,150 hours), that is about $75 per hour.
How many billable hours should a freelancer plan for?
Most full-time freelancers bill 20–30 hours a week, not 40. The rest of the week goes on finding clients, admin, invoicing, learning and unpaid revisions.
Planning on 40 billable hours is the most common reason freelance rates end up too low.
How do I turn an hourly rate into a project price?
Estimate the hours the project will take, add 15–25% for revisions, meetings and unknowns, then multiply by your hourly rate.
Quote the total as a fixed project fee rather than showing the hours. Clients compare outcomes, and you are rewarded when you work faster.
What should a monthly retainer cost?
A retainer reserves a set number of your hours each month. Price it at your hourly rate times the hours included, often with a small discount (5–10%) in return for guaranteed income.
The monthly figure in this calculator is the total revenue you need each month. Treat it as a floor if one client takes most of your time.