The short formula: divide the annual revenue your business needs by the hours you can realistically invoice. The hard part is estimating both numbers honestly.
Calculate my freelance rateStep 1: set the take-home income you need
Start with personal income rather than an attractive market rate. Decide how much you need to keep over a year after business costs and your tax reserve. Use a realistic target that covers normal living costs, savings, and the income stability you expect from the business.
Treat tax as a planning reserve, not a universal percentage. Tax rules depend on location, deductions, and business structure, so use professional advice when you need an exact figure.
Step 2: add the full cost of freelancing
A client rate must fund the business as well as your personal income. Include recurring and occasional costs rather than only the software subscriptions you pay every month.
- Software, hosting, and cloud services
- Insurance, accounting, and legal support
- Computer equipment and replacement reserve
- Marketing, sales, and professional memberships
- Training, conferences, and certifications
- Payment fees, bad debt, and contingency
Step 3: calculate realistic billable hours
Working hours and billable hours are not the same. Remove vacation and holidays first. Then estimate the percentage of each remaining week that can actually be charged to clients after proposals, calls, email, bookkeeping, marketing, and professional development.
Example
At 40 working hours per week, 46 working weeks, and 60% billable time, annual billable capacity is 1,104 hours: 40 × 46 × 0.60.
Step 4: divide revenue by billable capacity
Revenue target = business expenses + gross income required
Hourly floor = revenue target ÷ annual billable hours
The result is a financial floor, not a promise to sell every hour at exactly that price. Expertise, urgency, risk, demand, licensing, and the value of the result can justify a higher rate or a fixed project fee.
Turn the hourly floor into project pricing
Multiply the expected work by your hourly floor to create a minimum project price. Then include discovery, communication, testing, revisions, handoff, and uncertainty. If the client adds deliverables later, document the new work and its effect instead of quietly absorbing it.
Frequently asked questions
What is the formula for a freelance hourly rate?
Estimate the annual revenue your business needs, then divide it by realistic annual billable hours. Revenue should cover your desired take-home income, business expenses, and tax reserve. Billable hours should exclude vacation and non-client work.
Why should I not divide a salary by 2,080 hours?
That assumes 52 weeks of paid, fully billable 40-hour work. Freelancers also spend time on sales, proposals, administration, learning, and time off, while paying business costs that an employer may otherwise cover.
Should profit be included in a freelance rate?
A rate can include a profit or contingency margin above the financial floor. That margin helps the business absorb uncertainty, invest in tools and training, and avoid turning every unexpected cost into lost personal income.
Calculate your rate with your own numbers.
The free calculator includes expenses, tax reserve, vacation, and non-billable time—and keeps every input in your browser.
Open the free calculator