To set a freelance hourly rate, add the income you want and your business costs, adjust for the tax you will owe, then divide by the number of hours you can realistically bill. Most new freelancers do the opposite: they guess a number or copy someone else’s rate, and end up undercharging. Use the formula below and replace the example numbers with your own.
The formula
- Income target: how much you want to take home from freelancing in a year.
- Add business costs: software, equipment, internet, platform fees and anything else you pay to do the work.
- Add a tax reserve: divide by (1 minus your tax rate) to find the gross amount you need to invoice.
- Work out billable hours: weeks you will work, times hours per week, times the share of time that is billable.
- Divide: gross amount needed divided by billable hours is your minimum hourly rate.
Worked example
These numbers are an illustration, not a recommendation. Your tax rate and costs will differ, so check the rules where you live or ask an accountant.
| Step | Example |
|---|---|
| Take-home target | $6,000 a year |
| Business costs | $600 a year |
| Target plus costs | $6,600 |
| Tax reserve (assume 20%) | $6,600 ÷ 0.80 = $8,250 to invoice |
| Billable hours | 46 weeks × 5 hours × 70% billable = 161 hours |
| Minimum hourly rate | $8,250 ÷ 161 ≈ $51 per hour |
The 70% figure matters: time spent finding clients, replying to messages, invoicing and revising is not billable, so you cannot charge for every hour you work.
Why the lowest rate is not the safest rate
Setting your rate too low attracts clients who negotiate on price and leaves no room for slow weeks. Your rate also signals quality. If you are competing on platforms, our list of the best freelance platforms will help you compare how each one charges fees, which you should factor into the costs line.
Hourly, fixed price or retainer?
- Hourly: simple, but it punishes you for getting faster.
- Fixed price: better once you know how long a job takes. Quote at your hourly rate times a realistic time estimate, plus a buffer.
- Retainer: a set fee each month for an agreed amount of work. It gives you predictable income and is easier to plan around.
If you are early on, start hourly to learn how long things take, then move to fixed prices for jobs you repeat. Developers and designers can package repeatable jobs, as we describe in side hustles for software developers and side hustles for graphic designers.
Common pricing mistakes
- Forgetting that taxes and platform fees come out of what you invoice.
- Counting every hour as billable.
- Not raising rates after a few successful projects.
- Giving unlimited revisions with no limit written down.
- Quoting without defining exactly what is included.
When to raise your rate
Raise it when you are fully booked, when clients accept your quotes without discussion, or after you have a few strong testimonials. A small increase for new clients is the safest way to test it.
Not sure which side hustle to price?
The free Side Hustle Finder ranks side hustles against your time, budget and skills, so you know what to price before you start.
Second worked example: quoting a fixed price
Once you know your hourly rate, you can quote a project. Using the example rate of about $51 an hour from above, suppose you estimate a small website page will take 12 hours. Multiply 12 by $51 to get $612, then add a 20 percent buffer for revisions and unexpected requests: $612 times 1.2 is about $734. That is your fixed price. The buffer matters because most projects take longer than the first estimate.
Adjusting your rate for experience and niche
- Specialists usually charge more than generalists. A clear niche, such as e-commerce email copy or accessibility audits, makes clients willing to pay for expertise.
- Urgent work can cost more. A rush fee is reasonable if you have to rearrange your schedule.
- Long-term clients can get a modest discount in return for guaranteed monthly work, because you spend less time finding new clients.
- Your first few clients may be cheaper while you build samples, but set a date to raise your rate.
How to present your rate
State the price confidently and tie it to the result, not to your hours. For example: “The package is $734 and includes the design, two revision rounds and delivery within ten days.” Avoid apologising or offering a discount before the client has asked. If a client says it is too expensive, reduce the scope instead of the rate: offer a smaller package that fits their budget.
A quick quote checklist
- What exactly is included, and what is not?
- How many revision rounds?
- When will you deliver, and what do you need from the client first?
- What is the deposit, and when is the balance due?
- What happens if the scope changes?
Frequently asked questions
How do I calculate my freelance hourly rate?
Add your income target and business costs, adjust for tax, and divide by your realistic billable hours.
What share of my time is billable?
Many freelancers bill well under all of their working time because of admin, marketing and revisions. 60 to 70 percent is a common planning assumption, but track your own.
Should I charge by the hour or by the project?
Hourly helps while you learn how long jobs take. Fixed prices and retainers usually work better once your process is repeatable.
Do I need to charge tax?
It depends on your country and your income. Check local rules or ask an accountant, and set money aside from the start.
This article is general information, not financial or tax advice.
