How to work out a sustainable freelance rate
A practical starting point for a freelance day rate is required annual revenue divided by realistic billable days. Your revenue has to cover your business costs and the profit that pays for your personal spending, tax and savings. Billable days don’t include time you can’t charge clients for, such as holidays and admin.
Dividing your old salary by your working days leaves out some fairly important things. Build the business picture first. Then test the rate against the work and the market.
Build the annual picture
List the household income you need, your expected business costs and the profit you need to pay for tax, National Insurance (NI), savings and any pension contributions. Work out the tax separately. A pension payment or a personal savings target isn’t automatically a business expense. HMRC: business expenses, pension tax relief.
It may take a few attempts to reach a pre-tax profit target that gives you the take-home amount you want. Don’t add 20% to the take-home figure you want and assume that has worked the tax out in reverse.
Estimate billable days honestly
Start with the days you’re available to work. Then allow for:
time off
illness
admin
training
marketing
gaps between jobs
After that, think about how many of the remaining days you expect to sell.
The number will be different for every business. A consultant on a long contract and a designer with lots of short projects may have very different patterns.
A simple planning example
Suppose you choose a hypothetical annual profit target of £45,000 before personal tax and pension payments. Business costs are expected to be £9,000, giving a revenue target of £54,000 before VAT.
Expected billable days | Average daily revenue needed |
|---|---|
180 | £300 |
150 | £360 |
120 | £450 |
These are arithmetic examples: £54,000 divided by the days shown. The £45,000 target isn’t a recommended income, and the day rates aren’t market benchmarks.
The point is that utilisation, how many of your available days you actually sell, matters. Charging £300 a day doesn’t bring in £54,000 if you only sell 120 days.
Turn the number into a pricing decision
Compare your calculation with:
the value and scope of the work
demand
your experience
what clients will pay
If you charge a fee per project, estimate all the time involved, including meetings and revisions. Write down what’s included, so extra work can be priced separately.
What if the price you can get and a realistic workload don’t support your target? That’s useful information. You might:
change the service
reduce costs
improve the mix of work
revise the target
A rate calculator can’t make those trade-offs for you.
Once a job is done, review the hours it actually took and the revenue you collected. Over time, your own results will make the next estimate better.
