How the freelance rate is calculated
Your rate has to cover more than the salary you want. It must also pay your business expenses and leave enough aside for tax and the weeks you don't bill. The formula works like this:
- Gross up your desired income for tax:
income ÷ (1 − tax%) - Add your annual business expenses to get your yearly billing target.
- Divide that by your billable hours (hours per week × weeks per year).
The mistake most new freelancers make
They divide their old salary by 2,080 hours and use that as their rate. But freelancers don't bill 40 hours a week — much of the week goes to finding clients, admin, and unpaid work. Realistically you might bill 20–30 hours. They also forget tax and expenses. The result is a rate that feels fine but leaves them earning less than they did employed.
Tips for setting your rate
- Treat this number as your floor, not your ceiling — charge more when you can.
- Price by the project or outcome where possible, not just the hour.
- Raise your rate every few new clients.