How to Work Out What to Charge as a Freelancer

The question of what to charge is the one that stops more new freelancers than almost anything else. You do not want to price yourself out of the market. You do not want to undercharge and resent the work. You look at what other people seem to charge and find a range so wide it tells you nothing useful.

The answer is not to look at what the market charges and pick a number somewhere in the middle. The answer is to start from what you actually need to earn, work backward to an hourly or day rate, and then check whether that rate is viable in the market you are working in.

Start with what you need to earn

Begin with your desired annual income. Not what you think is realistic, not a conservative guess. What would you need to earn, after tax, to live the life you want and feel paid fairly for your skills? Write that number down.

Now add tax. If you are self-employed in the UK, you will pay income tax and National Insurance on your earnings above the threshold. A rough estimate is that if you want £40,000 take-home, you need to earn somewhere around £55,000 to £60,000 before tax, depending on your exact situation. The percentages vary by country. In Germany, the combined burden of income tax and health insurance can be 40% or more. In the US, add self-employment tax on top of income tax.

Next, add your business expenses. Software subscriptions, professional insurance, equipment, training, the desk you sit at, the portion of your rent or mortgage if you work from home. Add up what those cost per year.

Now you have a number: the total annual revenue you need to generate.

Divide by the days you can actually bill

A year has 365 days. Take out weekends. Take out holidays, which if you are self-employed you do not get paid for. Take out sick days. Take out the time you spend on marketing, admin, client calls, proposals, and all the work that surrounds the actual billable work.

Most experienced freelancers find they can bill somewhere between 180 and 220 days per year. When you are new, expect fewer. When you are busy and established, you might push toward 240. Use 200 as a reasonable middle estimate if you are not sure.

Divide your required annual revenue by your billable days. That is your day rate.

For example: £55,000 divided by 200 billable days is £275 per day. Divide by 7.5 to get an hourly rate, which lands at around £37 per hour.

The freelancer rate calculator does this calculation automatically, with fields for your income target, expenses, tax rate, and billable days. It saves the arithmetic and shows the result as both a day rate and an hourly rate.

Check it against the market

Once you have your rate, check whether it is viable. Search for what people in your role and your market typically charge. Industry surveys, freelancer communities, and job boards all give you signal. Talk to other freelancers if you can. Ask clients what they have paid for similar work.

If your calculated rate is well below market, that is good news. You have room to raise it without losing work. If your calculated rate is well above what the market pays, you face a harder decision: can you justify a premium through specialization or reputation, can you reduce your required income, or can you increase your billable days by working more efficiently?

Most of the time, new freelancers find their calculated rate is below market. That is the direction the mistake almost always goes. Undercharging feels safer because a lower number is easier to say out loud when a client asks. It is not safer. A rate that does not cover your costs and taxes leaves you overworked and underpaid within months.

Fixed price versus hourly

Your day rate gives you the foundation for pricing, whether you bill by the hour or by the project.

If you bill hourly, the rate is the rate. Quote it clearly and track your time honestly. The timesheet tool helps you record hours per project so your invoice matches what you actually worked.

If you work on fixed-price projects, use your day rate to estimate internally. How many days will this project realistically take? Multiply by your day rate, then add a buffer of 10 to 20% for unexpected revisions or scope creep. Quote that number as a project fee. Never quote a fixed price based on optimistic assumptions.

One thing worth tracking even on fixed-price projects is how many hours you actually spent. If a project you quoted as four days took six, you effectively billed at a rate two-thirds of what you intended. Over time, tracking that pattern tells you where your estimates are consistently wrong and lets you correct them.

When to raise your rate

Every time you win work easily and quickly, your rate is probably too low. If every proposal leads to a job, you are not pricing like someone whose time is in demand. The right rate involves some friction. Not every client will accept it, and that is fine.

Raise your rate when you take on a new client rather than midway through an existing relationship. An increase of 10 to 20% per year for established clients is reasonable if you are delivering good work and the relationship is solid.

Starting from a number that makes sense for your actual costs is the first step. Everything else, raising it, justifying it, negotiating around it, gets easier once you know what the number needs to be.

---

Related articles

• How to Invoice as a Freelancer: Everything You Need to Know
• Invoice Payment Terms: What They Mean and Which Ones to Use