How to work out your freelance rate

Dividing your target salary by 2,000 hours gives a rate that will not sustain you. Here is why, and what to use instead.

The naive calculation assumes every working hour is billable and that your costs are zero. Neither is close to true, and the gap is large enough to sink a freelance career.

Step-by-step

1. Enter the income you need.
2. Enter your business costs.
3. Enter realistic billable days.
4. Read the required rate.

Billable days, honestly

A year holds about 260 working days. Then subtract:

• Holiday — 25 days, because you need it.
• Public holidays — around 8.
• Illness — 5, optimistically.
• Selling, quoting and marketing — often 20% of what remains.
• Admin, invoicing, accounts, training — another 15%.

That leaves roughly 140–160 billable days, not 260. The rate must cover the whole year from those days alone.

Costs an employer used to pay

Employer pension contributions, national insurance, equipment, software, insurance, accountancy, training, workspace. As a freelancer these are yours, and they are not small — a common rule is that a freelance rate needs to be roughly double the equivalent hourly salary just to stand still.

Charging by the day or by the project

Hourly billing penalises you for being good at your job — getting faster reduces your income. Day rates are simpler to sell and to plan around.

Project pricing is better still where you can estimate reliably, because it prices the outcome rather than your time, and the client stops watching the clock. It requires firm scope, or it becomes the worst of both.

Frequently asked questions

How many billable days are realistic?

Around 140 to 160 a year for most freelancers once holiday, illness, selling and administration are taken out of 260 working days.

Why is a freelance rate so much higher than an equivalent salary?

Because it covers only the billable fraction of the year and must also pay for pension, insurance, equipment, software, accountancy, training and unpaid time. Roughly double the equivalent hourly salary is a common starting point.

Should I charge hourly or per project?

Per project where you can estimate reliably — it prices the result rather than your time and rewards efficiency. It requires clearly agreed scope.