How to Calculate Your Freelance Hourly Rate

Your freelance hourly rate is the lowest amount you can charge per hour and still reach your income goal after taxes, business expenses and unpaid time. Most new freelancers pick a rate by dividing a former salary by 2,080 hours, or by copying what someone else charges. Both methods usually lead to undercharging, and undercharging is the most common reason freelancers burn out or quit. This guide shows the exact formula, a full worked example, how your assumptions change the answer, and what to do with the number once you have it. If you only want the result, use the free freelance hourly rate calculator.

Why you cannot just divide a salary by 2,080 hours

A full-time employee is paid for roughly 2,080 hours a year (40 hours for 52 weeks). That pay already covers public holidays, sick days, meetings, training and admin. The employer usually also pays for equipment, software and part of the tax and insurance costs.

As a freelancer you only earn while you are billing a client. Everything else is unpaid: finding clients, writing proposals, answering emails, invoicing, bookkeeping, learning new skills and waiting between projects. You also pay for your own equipment, software, internet, insurance and taxes. If you take a salary-based hourly figure and charge that, you are effectively working for free during all of those unpaid hours.

The 4-step freelance rate formula

1. Pick your yearly take-home goal. This is the money you want to keep after tax and after paying business costs. Base it on your real monthly living costs, plus savings.
2. Gross it up for tax. Pre-tax income = take-home ÷ (1 − tax rate). With a 20% tax rate you divide by 0.8, not subtract 20%. That detail matters because tax is charged on the larger pre-tax amount.
3. Add your yearly business expenses. Software, equipment, internet, insurance, coworking, accounting, marketing and courses. The total is the revenue you need to invoice.
4. Divide by your billable hours. Billable hours per year = billable hours per week × (52 − weeks off).

Worked example, step by step

Say you want to take home 60,000 a year (any currency), expect a 20% tax rate, spend 5,000 on business costs, bill 25 hours a week and take 4 weeks off.

• Pre-tax income: 60,000 ÷ 0.8 = 75,000
• Revenue needed: 75,000 + 5,000 = 80,000 (about 6,667 a month)
• Billable hours: 25 × 48 = 1,200
• Hourly rate: 80,000 ÷ 1,200 = 66.67 per hour
• Weekly revenue at 25 billable hours: 66.67 × 25 = 1,666.67
• Daily rate: 66.67 × 25 hours ÷ 5 days = 333.33 per day

For comparison, a 60,000 salary at 2,080 hours is about 28.85 an hour. The freelance rate is more than double, and that is normal: the extra covers tax, costs and unpaid time. These figures are examples, not market rates. Put your own numbers into the calculator to see yours.

Billable hours change everything

Of all the inputs, billable hours move the answer the most. The table below keeps the same goals (60,000 take-home, 20% tax, 5,000 expenses, 4 weeks off) and only changes how many hours you bill each week.

Billing 15 hours a week requires a rate of about 111, while billing 40 hours requires only about 42. But 40 billable hours a week is almost never realistic for a freelancer, because the unpaid work still has to happen. If you are new and still building a client base, plan with a lower number such as 15 to 20 and raise it later.

Where does the rest of your week go?

A typical working week of 40 hours might look like this, as an illustration:

• 25 hours of billable client work
• 5 hours finding and pitching clients
• 4 hours of admin: invoices, bookkeeping, contracts
• 3 hours of client communication that is not directly billed
• 3 hours of learning, tools and portfolio updates

Your own split will differ. The best way to find it is to track your time for four weeks and see how many hours you can truly bill.

How your tax rate affects the answer

Tax can shift your rate by a surprising amount. Here are the same goals with three different combined tax rates (25 billable hours a week, 4 weeks off, 5,000 expenses, 60,000 take-home).

Use a combined estimate that includes income tax and any self-employment or social contributions in your country. If you are unsure, our guide on how much freelancers should save for taxes explains how to estimate it, and a local accountant can confirm it.

Common mistakes when setting an hourly rate

• Assuming 40 billable hours a week. Admin, marketing and client communication take a big share. 20 to 30 billable hours is a more realistic planning range for many freelancers.
• Forgetting time off. Holidays, sick days and slow periods are unpaid. Include them as weeks off.
• Ignoring expenses. Small subscriptions and equipment replacement add up over a year.
• Subtracting tax instead of dividing. Taking 20% off a number is not the same as dividing by 0.8.
• Setting a rate once and never changing it. Costs and skills change, and so should your rate.
• Discounting your minimum rate. If a client cannot pay your minimum, reduce the scope instead of the rate.

What to do with your number

Treat the result as your minimum, not your target. Round it up, then compare it with what clients in your niche actually pay by looking at job boards, competitor pages and community discussions. If the market pays less than your minimum, you have three levers: cut costs, bill more hours, or move to higher-value work or clients.

When you raise your rate, start with new clients. For existing clients, give a clear notice period (many freelancers use 30 to 60 days) and explain the change briefly. A small increase every 6 to 12 months is easier for clients to accept than a big jump after several years.

Once you know your hourly rate, you can price whole jobs with the project quote calculator, read hourly vs fixed-price pricing to decide which model suits each job, and try a version for your own work on the profession calculators page.