The mistake almost everyone makes
The standard method for setting a freelance rate is to take a salary you would be happy with, divide by 2,080 hours, and add a bit. That produces a number that is roughly half of what it needs to be, for three compounding reasons: not all your hours are billable, your employer used to pay for things you now pay for yourself, and nobody is withholding your tax any more.
This calculator runs the logic in the opposite direction. It starts from the money you need in your hand and grosses upward through every layer that takes a cut before it gets there.
One piece of arithmetic is worth getting right: tax has to be applied by division, not subtraction. A 30% tax rate means you need to earn about 1.43 times your take-home target, not 1.30 times it. Getting that backwards is the single most common error in freelance pricing, and it understates the required rate by roughly 10%.
A worked example
Target take-home of $70,000. 25 billable hours a week, 46 weeks a year, $8,000 of expenses, 30% set aside for tax, a 10% profit buffer and a 3% allowance for clients who never pay:
- Billable hours: 25 × 46 = 1,150 hours
- Pre-tax income needed: $70,000 ÷ 0.70 = $100,000
- Plus expenses: $108,000
- Plus 10% buffer: $118,800
- Grossed for 3% non-payment: $122,474
- Hourly rate: $122,474 ÷ 1,150 = $106.50
The instinctive answer to “I want to take home $70,000” is around $35 an hour. The defensible answer is three times that. Both describe the same standard of living.
Be honest about billable hours
This is the input that decides everything, and it is the one people inflate. A 40-hour working week does not contain 40 billable hours. Pitching, invoicing, chasing late payments, bookkeeping, contract admin, marketing, learning, and the gaps between projects are all real work that nobody pays for directly.
Sustained utilisation for an established solo freelancer typically lands between 50% and 65% of working hours — so 20 to 26 billable hours from a 40-hour week. In the first year or two it is often below 40%. If you enter 40 billable hours a week you will produce a rate that looks affordable and an income that never materialises.
The weeks figure deserves the same scrutiny. 52 weeks assumes no holiday, no illness, no public holidays and no quiet periods. 44 to 47 is realistic once you account for taking time off like a person rather than a machine.
The layers employment used to hide
A salary is a heavily bundled product. Working for yourself unbundles it, and each component reappears as a line item you now fund:
- Paid time off — holiday, sick leave and public holidays were paid weeks. Now they are unpaid weeks, already handled by the weeks-per-year input.
- Retirement contributions — employer matching disappears entirely. If you want the same retirement trajectory, that contribution belongs inside your take-home target.
- Insurance — health cover where it is employer-provided, plus professional indemnity and public liability, which most clients and contracts now require of you.
- Payroll taxes — the employer's half of social security or national insurance becomes yours to pay in most jurisdictions.
- Equipment and software — hardware, licences, subscriptions, a workspace, a phone and a connection.
- Cash-flow risk — a salary arrives on a known date. An invoice arrives 30, 60 or 90 days after the work, sometimes never. The non-payment allowance prices that in.
Tips to consider
The rate this page gives you is only as good as the four numbers you feed it. These are the ones worth revisiting.
- Set the tax percentage from your own position. It is deliberately yours to supply, because a real liability depends on your jurisdiction, your total income across every source, your filing status, your deductible expenses, your business structure, and any VAT or GST you may need to register for and remit. No single percentage can stand in for all of that.
- Use 25–35% as a placeholder, not an answer. Many accountants suggest reserving somewhere in that band as a starting point for a self-employed person — but treat it as a holding figure until a professional in your country has looked at your actual position.
- Reserve tax as the money arrives. Moving the percentage aside on receipt, rather than finding it at year end, is the habit that separates freelancers who find tax season boring from those who find it frightening. That share was never yours to spend.
- Be conservative about billable hours. Admin, quoting, invoicing, marketing and the work you redo for free all come out of the same week. Overstating billable hours is the most common way a rate ends up too low.
- Revisit the rate every year. Your expenses, your tax position and the value of your work all move. A rate set once and never reviewed quietly becomes a pay cut.
