How many billable hours should a freelancer plan for in a year?

Many freelancers find that only 50-65% of a working week ends up billable once admin, sales and unpaid gaps are subtracted, which is why 20-30 billable hours a week across 40-48 working weeks is a more realistic planning range than a full 40-hour week for 52 weeks.

What tax rate should I use in a freelance rate calculator?

In the US, combine your expected federal and state income tax bracket with the 15.3% self-employment tax on net earnings, which commonly puts total freelancers' set-asides in the 25-35% range depending on income level and state; outside the US, add whatever national insurance or social contribution scheme applies in place of self-employment tax.

Should business expenses be added before or after grossing up for tax?

Before. Expenses need to be covered by revenue just like take-home pay does, so they should be added to the target income first and the combined total grossed up for tax, otherwise the rate produced will fall short of covering both the expenses and the tax bill.

Why is my calculated hourly rate so much higher than my old salary divided by hours?

A salary-based hourly figure assumes roughly 2,080 paid hours a year and that an employer already covers payroll tax, benefits and downtime. A freelance rate has to recover the same target income from far fewer billable hours while also funding tax, benefits and unpaid admin time, so it is normal for the freelance figure to run well above the naive salary-divided-by-hours number.

How do I price a day rate instead of an hourly rate?

Multiply the calculated hourly rate by the number of hours in a working day, typically 7 or 8. An hourly rate of 95.96 becomes roughly 767.68 for an 8-hour day, though many freelancers round day rates to a cleaner figure for quoting purposes.

Does this rate account for VAT or sales tax charged to clients?

No, the calculated rate is the amount you keep before any consumption tax. Where VAT or sales tax applies, it is normally added on top of the quoted rate as a separate line for VAT-registered or tax-collecting freelancers, rather than absorbed into the rate itself.

Freelance hourly rate calculator

A freelance hourly rate is not the number you'd earn as an employee divided by 2,080 hours. It has to cover the income you actually want to keep, every business expense a payroll department would otherwise absorb, the tax and self-employment contributions nobody withholds for you automatically, and it has to be earned inside a working year that is shorter than it looks once admin, sales calls and holidays are subtracted from it.

Why billable hours are the number that breaks freelancers

A full-time employee is paid for roughly 2,080 hours a year, but a freelancer's billable hours are a fraction of that, because unpaid time goes into pitching, invoicing, admin and unpaid gaps between contracts. Someone working 25 billable hours a week for 44 weeks a year only bills 1,100 hours, even though they may be at a desk for 40 or more hours weekly.

That gap is the single most common reason freelance rates end up too low: a new freelancer converts a desired salary into an hourly figure using a full-time hour count, then discovers the same annual income needs to come from under half as many paid hours.

Overestimating billable hours has the same effect as underestimating it does the opposite: quoting a rate based on 35 billable hours a week when the realistic figure is 22 leaves a permanent shortfall that only shows up once the tax bill and slow months arrive.

Three rate calculations with different targets

A designer wants 70,000 in take-home pay, expects 6,000 in software subscriptions and equipment for the year, plans to bill 25 hours a week across 44 working weeks, and sets aside 28% for tax and self-employment contributions. Grossing up 76,000 for that tax rate needs 105,556 in revenue, which divided across 1,100 billable hours comes to an hourly rate of about 95.96.

A consultant with a higher target of 120,000, heavier costs of 15,000 for travel and professional insurance, a fuller 30-hour week over 48 weeks, and a lower 22% tax rate needs 173,077 in revenue across 1,440 billable hours, landing on a rate of roughly 120.19 an hour.

A part-time freelancer aiming for a modest 45,000, with only 3,000 in expenses, 20 billable hours a week for 40 weeks, and a 15% tax rate needs 56,471 in revenue over 800 billable hours, for a rate near 70.59 an hour. Notice that a lower target combined with fewer billable hours still lands on a comparable hourly figure to someone earning far more, because both revenue and hours shrank together.

Where the formula stops matching reality

The calculation assumes every billable hour actually gets billed at the full rate, but real freelance work includes discounted rush jobs, scope creep on fixed-price projects, and clients who negotiate down from the quoted number. Any of those erodes the effective rate below the figure the formula produces.

It also assumes a single blended tax rate covers everything, when in practice self-employment tax, income tax and any state or local tax often apply at different rates to different slices of income, and some of those slices are progressive rather than flat. Treat the tax-rate slider as an estimate to be checked against an actual tax return or an accountant's projection, not a substitute for one.

The model has no room for unpaid downtime between contracts. If bookings run at 70% of the planned billable hours in a slow quarter, the same rate produces proportionally less income that quarter even though the hourly number never changed, so many freelancers build a buffer into the target income figure to cover exactly this.

Self-employment tax, VAT and other jurisdiction details

In the United States, self-employment tax currently runs at 15.3% on net self-employment earnings up to the Social Security wage base, covering both the employer and employee shares of Social Security and Medicare, on top of ordinary federal and state income tax. That combined burden is usually well above what a salaried employee sees deducted from a paycheck, which is why the tax-rate input in this calculator often needs to sit higher than an employee's expected withholding.

In the UK, a sole trader pays Class 2 and Class 4 National Insurance alongside income tax, and anyone billing above the VAT registration threshold must add VAT on top of the calculated rate for VAT-registered clients, which is a separate line from the tax set-aside modelled here. EU freelancers face country-specific social contribution schemes that can differ sharply even between neighbouring countries, so a rate that works when incorporated in one EU state may not translate directly to another.

Quarterly estimated tax payments are common wherever self-employment income isn't withheld at source, and missing a payment date can add penalty interest on top of the tax itself, so the annual set-aside this calculator produces is usually best split and paid across the year rather than saved for a single year-end bill.

Frequently asked questions

How many billable hours should a freelancer plan for in a year?: Many freelancers find that only 50-65% of a working week ends up billable once admin, sales and unpaid gaps are subtracted, which is why 20-30 billable hours a week across 40-48 working weeks is a more realistic planning range than a full 40-hour week for 52 weeks.
What tax rate should I use in a freelance rate calculator?: In the US, combine your expected federal and state income tax bracket with the 15.3% self-employment tax on net earnings, which commonly puts total freelancers' set-asides in the 25-35% range depending on income level and state; outside the US, add whatever national insurance or social contribution scheme applies in place of self-employment tax.
Should business expenses be added before or after grossing up for tax?: Before. Expenses need to be covered by revenue just like take-home pay does, so they should be added to the target income first and the combined total grossed up for tax, otherwise the rate produced will fall short of covering both the expenses and the tax bill.
Why is my calculated hourly rate so much higher than my old salary divided by hours?: A salary-based hourly figure assumes roughly 2,080 paid hours a year and that an employer already covers payroll tax, benefits and downtime. A freelance rate has to recover the same target income from far fewer billable hours while also funding tax, benefits and unpaid admin time, so it is normal for the freelance figure to run well above the naive salary-divided-by-hours number.
How do I price a day rate instead of an hourly rate?: Multiply the calculated hourly rate by the number of hours in a working day, typically 7 or 8. An hourly rate of 95.96 becomes roughly 767.68 for an 8-hour day, though many freelancers round day rates to a cleaner figure for quoting purposes.
Does this rate account for VAT or sales tax charged to clients?: No, the calculated rate is the amount you keep before any consumption tax. Where VAT or sales tax applies, it is normally added on top of the quoted rate as a separate line for VAT-registered or tax-collecting freelancers, rather than absorbed into the rate itself.

Sources

IRS Self-Employment Tax (Social Security and Medicare Taxes) — States the combined 15.3% self-employment tax rate on net self-employment earnings up to the annual Social Security wage base (guidance current as of the 2025 filing year).
HMRC: Self-employed National Insurance rates — Sets out Class 2 and Class 4 National Insurance thresholds and rates that UK sole traders owe alongside income tax (page maintained by HMRC for the current tax year).