Freelance Hourly Rate Calculator
The hourly rate a freelancer needs to reach a target income after unbilled time, business costs, benefits and money set aside for tax.
Result
Hourly rate needed: $121.98
The rate your costs require, not what the market will pay. No market rate is given, because it varies by field and place.
- Revenue needed for the year
- $134,666.67
- Billable hours a year
- 1,104
- Target income ÷ 2,080 hours, for comparison
- $38.46
- Set aside for tax
- $33,666.67
https://calcgallery.com/business-investing/freelance-hourly-rate-calculator/
Results are arithmetic estimates based on the assumptions you enter, not accounting, tax, investment or lending advice. Forecasts can be wrong and important decisions should be checked with a qualified adviser. Read the full disclaimer
How to use the Freelance Hourly Rate Calculator
- Enter the income you want to pay yourself for the year, before tax.
- Enter the weeks you expect to work, the hours in a working week, and the share of those hours a client will pay for.
- Enter your yearly business expenses and self-paid benefits, and the share of revenue you set aside for tax.
The formulas
billable hours = working weeks × hours a week × billable sharerevenue needed = (target income + expenses + benefits) ÷ (1 − tax share)hourly rate = revenue needed ÷ billable hoursDividing by one minus the tax share, rather than adding the tax share, is deliberate. Tax is set aside out of revenue, so to keep 75% after setting aside 25%, revenue has to be the costs divided by 0.75.
The comparison figure
The page also shows your target income divided by 2,080 hours, which is 52 weeks of 40 hours. That is the salaried equivalent many freelancers start from. The gap between it and the rate needed is the cost of unbilled time, business expenses, benefits and tax.
What the diagram shows
The revenue needed for the year, split into the income you keep, the expenses and benefits you pay for, and the tax you set aside.
With your numbers
- Billable hours = 46 weeks × 40 hours × 60% = 1,104
- Revenue = ($80,000.00 + $12,000.00 + $9,000.00) ÷ (1 − 25%) = $134,666.67
- Rate = $134,666.67 ÷ 1,104 hours = $121.98 an hour
Quick reference
The rate your costs require, not what the market will pay. No market rate is given, because it varies by field and place.
| Example | Hourly rate needed |
|---|---|
| 80,000 target, 60% billable | $121.98 |
| 80,000 target, 80% billable | $91.49 |
| 50,000 target, part time | $95.78 |
| 120,000 target, 50% billable | $213.94 |
| No costs or tax, full year | $38.46 |
| 65,000 target, 40 weeks | $102.56 |
Common questions about the Freelance Hourly Rate Calculator
- Why is the rate so much higher than my old hourly pay?
- An employer paid for your holidays, your unbilled time, your equipment, your benefits and part of your tax. As a freelancer you pay for all of that from what you bill. An 80,000 target divided by 2,080 hours gives 38.46, but after 46 working weeks, 60% billable time, 21,000 of costs and benefits and 25% set aside for tax, the rate needed is 121.98.
- What share of hours is billable?
- Only you can say, and it is often lower than people expect. Finding clients, writing proposals, invoicing, bookkeeping and learning all take time no one pays for. Track a few weeks honestly before relying on a high figure. At 80% billable instead of 60%, the rate needed in the example falls to 91.49.
- How much should I set aside for tax?
- It depends on where you live, your total income, how your business is set up and what you can deduct, so the page does not calculate it. Use your own estimate or one from an accountant.
- Is this what I should charge?
- It is the least you need to charge to reach your target. What clients will pay depends on your field, skills and market, which this page does not know. If the market rate is lower, the gap tells you how much to change the target, costs or billable hours.