Stop guessing what to charge
Underpricing is the most common mistake freelancers make. Most set their rate by copying someone else’s number, halving what an agency charges, or doing vague maths in their head. All three approaches usually end with the same result: a rate that barely covers costs once taxes, quiet weeks and unpaid admin are counted.
This calculator works backwards from the life you actually want. Enter your target annual income (after tax, what you need to live on), your business costs, and how many hours you can realistically bill. It shows the hourly rate that makes the maths work — using real billable hours, not the fantasy of 40 billable hours a week, 52 weeks a year.
How to use it
- Enter your target annual take-home pay: the amount you need to live on after tax, not before.
- Add your annual business costs: software, equipment, insurance, coworking, marketing, accounting.
- Add the tax you expect to set aside as a percentage (a rough figure is fine — the page explains typical ranges below).
- Enter your realistic billable hours per week and working weeks per year. Be honest: most freelancers bill 20–30 hours a week for 46–48 weeks.
- Read your minimum viable rate, your recommended rate (with a buffer for growth and dry spells), and the effective rate after costs so you can see what you actually keep.
What it calculates and how the formula works
Most rate calculators divide by 2,080 hours (40 hours × 52 weeks). That number assumes you bill every working hour and never take a holiday, get sick, do admin or look for clients. The research on this category is clear: it is fantasy maths. This tool uses your real numbers:
| Step | Formula |
|---|---|
| Gross income needed | Target take-home ÷ (1 − tax rate) |
| Total revenue needed | Gross income needed + annual business costs |
| Annual billable hours | Billable hours/week × working weeks/year |
| Minimum hourly rate | Total revenue needed ÷ annual billable hours |
| Recommended rate | Minimum rate × 1.2 (20% buffer for growth, late payments, dry spells) |
Assumptions stated openly:
- The tax input is a single blended percentage you choose (many freelancers set aside 25–30% in the US/UK; your actual liability depends on your country and income). This is a planning figure, not a tax computation.
- “Working weeks” should exclude holidays, sick days and expected gaps between projects.
- The 1.2× buffer is a planning convention, not a rule of nature. It accounts for late payments, scope creep and the fact that income is lumpy.
- The tool does not account for income tax brackets, national insurance or self-employment tax precisely — it grosses up with your blended percentage instead.
Worked example: freelance graphic designer
Tom is a graphic designer in Leeds going freelance after five years in an agency. He enters:
- Target take-home: £32,000 per year
- Business costs: £3,600 per year (Adobe £600, laptop replacement £800, insurance £400, coworking £1,200, marketing £600)
- Tax set-aside: 25%
- Billable hours: 25 per week × 47 working weeks = 1,175 hours per year
The maths:
- Gross income needed: £32,000 ÷ (1 − 0.25) = £42,667
- Total revenue needed: £42,667 + £3,600 = £46,267
- Minimum hourly rate: £46,267 ÷ 1,175 = £39.38/hour
- Recommended rate: £39.38 × 1.2 = £47.25/hour
Compare that with the fantasy-maths answer (£46,267 ÷ 2,080 = £22.25/hour). At £22/hour Tom would have fallen roughly £20,000 short of his target. This is exactly why most beginner freelancers feel permanently broke despite being busy.
Important considerations and limitations
- Your rate is a floor, not a price tag. The calculator gives the minimum you must charge to hit your target. Market rates, your positioning and the value you deliver can all justify more — rarely less.
- Tax is genuinely complicated. A single percentage is a planning shortcut. In the US you owe self-employment tax (15.3% on top of income tax); in the UK there are Class 2/4 National Insurance contributions. Use the figure as a set-aside guide and talk to an accountant.
- Benchmarks matter. The tool shows your number; you should still sanity-check it against what designers, developers or writers in your market charge. One “average freelance rate” is nearly useless because the spread across specialties is enormous.
- Raising rates later is normal. Most successful freelancers raise their rates 10–20% a year as their portfolio and demand grow. Re-run this calculator annually.
- Browser-local: your income and cost figures never leave your browser.
Frequently asked questions
How do I calculate my freelance hourly rate?
Work backwards: decide your target annual take-home, add business costs, gross up for tax, and divide by your realistic annual billable hours. The calculator above does exactly this in seconds.
Why do most online calculators give me a rate that feels too low?
Because they divide by 2,080 hours — 40 billable hours a week, 52 weeks a year. Real freelancers bill roughly half of that once admin, marketing, holidays and gaps between projects are removed. Dividing by fantasy hours produces fantasy rates.
How many billable hours should I assume per week?
Most experienced freelancers land between 20 and 30 billable hours a week. Start with 20–25 if you are new and still doing lots of marketing and admin, and adjust after a few months of tracking your time honestly.
Should I charge more than the calculator says?
The calculator gives your minimum. If demand is strong, your portfolio is deep, or the project is urgent or high-value, charge more. Pricing is a floor set by maths and a ceiling set by the market.
What percentage should I set aside for tax?
It depends on your country and income. Many US freelancers set aside 25–30% (income tax plus 15.3% self-employment tax); UK freelancers often land around 20–25% including National Insurance. These are planning figures — check your actual liability with an accountant.
How is this different from the hourly rate calculator?
This tool is built for freelancers setting their prices: it starts from your income goal and works forward. The hourly rate calculator converts between salary, hourly, monthly and annual pay — useful when comparing a freelance rate against a job offer.
Is my financial data uploaded anywhere?
No. All calculation happens in your browser. We never see your income, costs or rates.
Related tools
External references
- IRS — Self-employment tax
- IRS — Estimated taxes for the self-employed
- GOV.UK — Working for yourself (self-employed)
- SBA — Plan your business (includes cost structure guidance)
This tool provides estimates for guidance only and is not professional financial, tax, or legal advice.