Guide
Setting a freelance rate that covers tax, costs and the hours you cannot bill
A salary of 60,000 does not translate into a freelance rate of 60,000 divided by the hours in a year. As a freelancer you pay your own tax and insurance, buy your own equipment, take unpaid holidays and spend part of every week on work that no client pays for. This page starts from the money you want to take home and works backwards to the hourly rate, the day rate and the monthly revenue that make it happen.
From goal to revenue
First the page grosses up your goal for tax. If you want 60,000 after tax and you set aside 25% of profit, you must earn 60,000 ÷ 0.75 = 80,000 before it. Then it adds your business costs for the year, such as software, equipment, insurance and a workspace. In the default case, 80,000 plus 6,000 of costs makes the revenue needed 86,000, of which 20,000 is tax and 6,000 is costs.
From hours to rate
Next come the hours. The page multiplies your weekly hours by the share you can bill and by the weeks you work. With 40 hours a week, 60% billable and 46 working weeks, that is 40 × 0.6 × 46 = 1,104 billable hours. Dividing 86,000 by 1,104 gives an hourly rate of 77.90. The day rate for eight billable hours is 623, and the monthly revenue to aim for is 7,167.
The employee comparison
One line shows what an employee earning the same take-home pay gets per hour worked: 60,000 ÷ (40 × 46) = 32.61. The gap between 32.61 and 77.90 is not greed. It is tax, costs, and the 40% of the week that is not billed. Showing it makes the rate easier to defend when a client says it sounds high.
A second example
The consultant sample wants 90,000 after tax, has 9,000 of costs, sets aside 30%, bills 75% of the time and works 44 weeks. Revenue needed is 137,571.43, of which 38,571.43 is tax, over 1,320 billable hours. The hourly rate is 104.22, the day rate 834 and the monthly target 11,464. The employee-equivalent rate is 51.14. If the consultant prices a project at 80 hours, the quote line shows 8,338.
Choosing the billable share
This is the number that moves the answer most. At 60% you bill about 24 of every 40 hours. Raise it to 75% and the rate falls by a fifth. Be honest: sales calls, invoices, accounts, learning, proposals that do not win and revisions you do not charge for all take time. A timesheet kept for a month or two will give a better figure than a guess.
Edge cases
The billable share must be above 0 and at most 100, the weeks above 0 and at most 52, the weekly hours above 0 and at most 100, and the tax share at most 90. A tax share of 0 skips the gross-up. The optional project box accepts a number of hours above zero. If you work fewer than 52 weeks, enter the weeks you actually earn, not the weeks in the calendar.
Limits
Tax is treated as one flat share of profit, and any social security or self-employment contributions must be inside it. Real tax has bands, allowances and deductions that depend on the country. The rate is the break-even rate for your goal, not a market price: clients pay for value, and the market may pay more or less. Add a buffer for slow months, illness and the day a client pays late.
Related tools
- Salary Calculator converts the rate into weekly, monthly and yearly pay.
- Hours Calculator totals the time you log against each client.
- Invoice Generator turns the hours and rate into a bill.
- CTC to In-Hand Calculator shows what a salaried offer pays after deductions, for comparison.
Checked against the current version of the Freelance Hourly Rate Calculator on .