Freelance rates explained: hourly rate, day rate and billable hours

Updated: 30 October 2026

A freelance rate is not a salary divided by the hours in a year. The rate has to pay the tax and contributions, the business costs and the weeks without paid work, and it can only be charged for the hours a client pays for. This guide works through one example with the inputs the freelancer calculator starts with: 30,000 a year to take home, 6,000 of business costs, 25% of profit going to tax and contributions, 40 hours a week over 5 days, 6 weeks a year without paid work, 70% of the working time billable and a 15% safety margin. Amounts are in whatever currency you use; rates exclude VAT or sales tax.

Start from what you need to earn

The first figure is the revenue the business needs in a year. Tax and contributions are taken from the profit, so the take-home income has to be grossed up before the costs are added:

Step	Calculation	Result
Take-home income	—	30,000
Before tax and contributions	30,000 ÷ (1 − 25%)	40,000
Plus business costs	40,000 + 6,000	46,000

So the business needs 46,000 of revenue a year. Taxing everything at one percentage of profit is a simplification: in most countries the rate rises with income and contributions have their own rules, so use the share your accountant or last tax return gives you.

Freelance rate calculator

Billable hours: the number most estimates get wrong

An employee working 40 hours a week is paid for 52 weeks, 2,080 hours. A freelancer is not paid for holidays, public holidays, sick days or training, and in the example those take 6 weeks, which leaves 46 × 40 = 1,840 working hours. Not all of them can be invoiced either: quotes, invoicing, bookkeeping, finding the next client and learning take time too. With 70% billable, 1,840 × 70% = 1,288 hours a year are left to earn the 46,000.

The billable share is also called utilisation. It is the number that moves the rate most, and it is easy to overestimate: 1,288 hours is only 62% of the 2,080 an employee is paid for.

Minimum and recommended hourly rate

The minimum hourly rate is the revenue divided by the billable hours: 46,000 ÷ 1,288 = 35.71. Charging that leaves nothing for a quiet month, a client who pays late or a project that takes longer than quoted. The safety margin covers those: 35.71 × 1.15 = 41.07 is the recommended rate.

Day rate and project price

A day rate is the hourly rate times the hours in a working day, here 40 ÷ 5 = 8: 41.07 × 8 = 328.57. A project price is the hourly rate times the hours you expect it to take, 41.07 × 40 = 1,642.86 for 40 hours; estimate the hours honestly rather than lowering the rate to win the work. Spread over twelve months, the revenue plus the margin is a billing target of 4,408.33 a month.

Everything else stays as in the example; only the billable share changes:

Billable share	Billable hours a year	Minimum rate	Recommended rate
50%	920	50.00	57.50
60%	1,104	41.67	47.92
70%	1,288	35.71	41.07
80%	1,472	31.25	35.94

Going from 70% to 50% billable raises the recommended rate by about 40%. If most of your week goes on sales and administration, either the rate or the billable share has to change.

Common mistakes

Dividing the income you want by 2,080 hours. In the example that gives 14.42, less than half the minimum rate of 35.71.
Leaving out business costs: equipment, software, insurance, an accountant, a workspace.
Counting 52 working weeks. Holidays, public holidays and illness are unpaid for a freelancer.
Assuming every working hour is billable.
Quoting the minimum rate as the price, so that a single slow month means a loss.
Mixing rates with and without VAT. Quote and compare rates before VAT; add it on the invoice if you are registered.

Frequently asked questions

How many billable hours does a freelancer have in a year?

It depends on the weeks off and the billable share. With 40 hours a week, 6 weeks off and 70% billable it is 1,288 hours; with 50% billable, 920.

Is a day rate just eight times the hourly rate?

Only with an eight-hour day. The calculator multiplies the hourly rate by the hours per week divided by the days per week, so 40 hours over 5 days gives 8 hours a day.

Should my rate include VAT?

No. Work out and quote the rate before VAT or sales tax; the tax is added on the invoice and passed on to the authorities.

What is utilisation?

The share of your working time a client pays for. At 70% of 1,840 working hours it is 1,288 billable hours a year.

Why is a freelance rate so much higher than an employee’s hourly wage?

Because it also pays for the tax and contributions, the business costs and the unpaid and unbillable time. In the example the take-home income is worth 14.42 an hour on an employee’s 2,080 hours, but the recommended rate is 41.07.

Tools for this topic

Real hourly wage calculator