How to Price Freelance Work Without Guessing
Most freelancers set their rate by copying competitors or doubling an old salary's hourly equivalent. Both methods skip the same four costs — and the skipped costs are why "busy" freelancers still end the year broke.
The four things your rate must pay for
- Your take-home income — the salary you actually want to live on.
- Taxes — unlike an employee, you pay both sides in many countries. Gross up, don't absorb.
- Business expenses — software, gear, insurance, accounting, transaction fees.
- Unpaid time — holidays, sick days, admin, marketing and the gaps between projects. A 40-hour week rarely contains more than 25–30 billable hours.
The formula
Minimum rate = (target take-home + yearly expenses) ÷ (1 − tax rate) ÷ billable hours per year.
Example: targeting $60,000 take-home with $3,000 of expenses, a 20% tax rate and 1,440 billable hours (48 working weeks × 30 billable hours) gives (63,000 ÷ 0.8) ÷ 1,440 ≈ $54.70/hour. Charging $40 "because the market" pays you roughly $44,000 — the missing $16,000 was never profit, it was arithmetic. Run your own numbers in the hourly rate calculator.
Then sanity-check against value
The formula gives your floor, not your price. If a project saves a client $50,000, a value-based fee above your floor is fair game. But never let a "prestige" project talk you below the floor — exposure does not pay the tax reserve.
Review the floor twice a year
Expenses creep, tax brackets shift, and your target income should grow with your skill. Recompute your floor every six months and raise rates for new clients first; existing clients get the new rate at renewal, with notice. Track what you actually charged against the floor in your income log — the free Income Tracker is enough to start.