How to calculate your freelance hourly rate

A formula that accounts for the hours nobody pays you for

The classic freelancer mistake is taking your old salary and dividing by 2,080 hours. That number ignores everything that makes freelancing different: unpaid admin time, gaps between projects, self-employment taxes, your own equipment and insurance, and the vacation days nobody funds anymore. Price that way and you'll work more than you did employed, for less.

The formula

Rate = (income goal + business expenses) ÷ (1 − tax rate) ÷ billable hours per year

1. Income goal. What you want to actually live on, per year, after the business is paid for.
2. Business expenses. Software, hardware, insurance, coworking, accounting — freelancers typically land between $2,000 and $10,000 per year.
3. Taxes. Depending on your country, self-employment tax plus income tax often takes 25–40%. Dividing by (1 − rate) grosses your target up.
4. Billable hours. This is the number people get wrong. Start with 52 weeks, subtract vacation, holidays and sick days (~6 weeks total), then multiply the remaining weeks by the hours you can genuinely bill — for most freelancers that's 50–60% of a 40-hour week once admin, marketing and proposals are subtracted. Realistic result: 900–1,200 billable hours a year, not 2,080.

A worked example

Income goal $70,000, expenses $5,000, tax rate 30%, and 46 working weeks × 22 billable hours = 1,012 hours:

($70,000 + $5,000) ÷ 0.70 ÷ 1,012 ≈ $106/hour — probably double the naive salary division, and the difference is exactly the cost of being your own employer.

After the math

• Treat the result as a floor, not a target. Charge more when demand allows; never less for long.
• Quote day rates or project fees derived from the hourly number — clients compare those less directly.
• Revisit twice a year. Expenses and demand change; your rate should too.
• Invoice professionally. A clean invoice with clear terms gets paid faster — QuickInvoice generates one free, with PDF export.