How to set a freelance hourly rate (worked out from the pay you want)

How to · Updated 2026-11-10

Start with the yearly take-home you want, add tax and business costs, then divide by the hours you can actually bill. A worked example and three quick checks.

To set a freelance hourly rate, work backwards: decide the yearly take-home you need, gross it up for tax, add your business costs, and divide by the hours you can actually invoice in a year. The freelance rate calculator does each step and shows how the rate moves if you bill more or fewer hours. Once you have a number, invoice maker turns it into a bill.

What you need

• The take-home pay you want in a year, after tax. A household budget is the honest place to get this.
• Yearly business costs: laptop and software, insurance, a phone line, accounting fees, a desk at a shared office, training.
• The share you set aside for tax and savings, as a percentage of what you bill. Income tax and social contributions for the self-employed differ widely by country, so check the official source or ask an accountant.
• Weeks you will not bill: holidays, public holidays, sick days, and the quiet weeks between clients.
• Billable hours in a normal week: only hours a client pays for. Emails, quotes, bookkeeping and finding work are real hours but nobody is invoiced for them.
• Days you work each week, to turn the hourly figure into a day rate.

Step by step

The method in three lines:

Billing needed = take-home ÷ (1 − tax share) + business costs

Billable hours a year = (52 − weeks off) × billable hours a week

Hourly rate = billing needed ÷ billable hours a year

Dividing by (1 − tax share) is the key move. If you keep 25% aside, you take home only 75% of each sale, so the take-home has to be divided by 0.75, not multiplied by 1.25.

With the tool:

1. Open freelance rate and choose your currency.
2. Enter Take-home pay you want and Business costs for the year.
3. Enter Tax and savings set aside as a percentage.
4. Fill in Weeks off, Billable hours per week and Days you work per week.
5. Read the hourly rate, day rate, billing needed and billable hours a year. The table under How your rate changes repeats the sum for 5 and 10 hours a week more and fewer than yours.

A worked example

Tom is a freelance illustrator.

• He wants 45,000 a year to take home.
• His costs are 4,500 a year (software, a drawing tablet replacement fund, insurance, an accountant).
• He sets aside 25% for tax.
• He plans 6 weeks off: holidays plus a cushion for sick days and gaps.
• He expects 25 billable hours a week over 5 days.

Billing needed = 45,000 ÷ 0.75 + 4,500 = 60,000 + 4,500 = 64,500.

Working weeks = 52 − 6 = 46. Billable hours = 46 × 25 = 1,150.

Hourly rate = 64,500 ÷ 1,150 = about 56.09. A day of 5 billable hours is about 280.43.

The table shows how much hangs on the hours guess. At 20 billable hours a week the rate rises to about 70.11; at 30 hours it falls to about 46.74. If Tom is new and not sure clients will keep him busy, the 20-hour row is the safer place to start.

To see how 56 an hour compares with a staff job, the salary converter can turn an employee’s yearly salary into an hourly figure. Remember that the employee’s number already includes paid holidays and an employer paying for the laptop.

Check your answer

• Run it forwards. 1,150 hours × 56.09 is about 64,500. Take off 4,500 of costs to leave 60,000; keep 75% of that and you have 45,000. Back where you started.
• Compare with a rough rule. Some freelancers start from “a salary divided by 1,000 gives an hourly rate”. 45,000 ÷ 1,000 = 45, below Tom’s 56, because his tax share and costs are higher than that shortcut assumes. A result wildly above or below it is worth a second look at your inputs.
• Check the hours are believable. 1,150 billable hours is about 25 a week. Track a month of real work; if you bill fewer hours, the rate must rise to match.

Questions people ask

Should I charge by the hour or by the project? Work out the hourly rate either way. For a fixed-price job, estimate the hours, multiply by your rate, then add a buffer for changes. The hourly figure is your floor.

Is the tax share the same as my tax rate? Not quite. Use your best estimate of income tax plus any self-employed contributions on profit, and some people add a slice for pension savings too. Rules differ by country, so check the official source. This is general education, not tax advice.

What if the market rate is lower than my number? Then one of the inputs has to give: fewer weeks off, lower costs, more billable hours, a lower take-home, or a niche where clients pay more. Seeing which lever moves the rate most is the point of the exercise.