Why not just divide a salary by 2,080 hours?
An employee is paid for about 2,080 hours a year, holidays and sick days included, while the employer covers equipment, software, pension contributions and the time spent finding work. A freelancer pays for all of that and only earns during billable hours, so a rate based on a salary alone comes out far too low.
The method
- Choose the income you want after tax.
- Gross it up for tax: income ÷ (1 − tax rate).
- Add your business costs: equipment, software, insurance, accounting, workspace, training and pension saving.
- Count your billable hours: weeks you will work × hours a week you can bill. Admin, sales and unpaid gaps between projects take a large share of the week, so many freelancers bill 20 to 30 hours of a 40-hour week.
- Divide the total by the billable hours.
A worked example
You want 60,000 a year after tax, pay about 25% tax and have 6,000 of business costs.
- Before tax: 60,000 ÷ 0.75 = 80,000.
- With costs: 80,000 + 6,000 = 86,000 to bill each year.
- Billable hours: 46 weeks × 25 hours = 1,150.
- Rate: 86,000 ÷ 1,150 = 74.78 an hour, or about 598 for an 8-hour day.
Check it against the market
The result is the minimum that meets your goals. Compare it with what clients pay for similar work; experience and specialist skills can command more, and a rate well below the market can make clients doubt the quality. Review it every year as costs and experience change.
Calculators
The Freelance Rate Calculator does this with your own numbers and gives the day rate too. To compare with a salaried job, use the Salary to Hourly Calculator and the Take-Home Pay Calculator.