Freelance Hourly Rate Calculator (from target income)

Understanding the freelance hourly rate — concept and principle

Setting a freelance rate by guesswork often leads to charging too little. A better approach starts from the income you want to keep and works backwards: add your business costs, allow for tax and social contributions, and spread the total over the hours you can realistically bill. This calculator does exactly that and gives a minimum hourly rate, the yearly revenue needed and an 8-hour day rate. It works with any currency.

How it is calculated

1. Revenue needed = business costs + target take-home ÷ (1 − tax rate ÷ 100)
2. Billable hours per year = working weeks × billable hours per week
3. Minimum hourly rate = revenue needed ÷ billable hours
4. Day rate = hourly rate × 8

Target take-home is the personal income you want to end up with; the calculator adds tax on top of it. Business costs cover software, equipment, insurance, accounting and marketing. Tax & social contributions is entered as a share of profit (revenue minus business costs). Working weeks excludes holidays and sick time, and billable hours counts only time clients pay for.

The principle

Dividing by (1 − tax rate) is a gross-up: if 28% of profit goes to tax, only 72% is left, so profit must be 1 ÷ 0.72 ≈ 1.39 times what you need to keep. Business costs are added afterwards without a gross-up, because in most tax systems they are deductible: tax falls only on what remains after costs. Spreading revenue over billable hours, not all working hours, builds unpaid admin and sales time into the price.

Worked example

1. Profit before tax: 70,000 ÷ 0.72 = $97,222.22 (tax $27,222.22).
2. Revenue needed: 97,222.22 + 9,000 = $106,222.22.
3. Billable hours: 46 × 25 = 1,150 hours a year.
4. Hourly rate: 106,222.22 ÷ 1,150 = $92.37.
5. Day rate: 92.367 × 8 = $738.94.

How to read the result

This is a floor: below it you do not reach your income goal even when fully booked at the assumed hours. Compare it with market rates for your field. If your floor is well above the market, look at billable hours and costs before cutting your income target. If it is well below, you may be underpricing.

Common mistakes

• Using 40 billable hours a week; 20 to 30 is more typical once admin and sales are counted.
• Forgetting holidays, sick days and training when choosing working weeks.
• Entering a marginal tax rate when your average rate is much lower, or the reverse.
• Quoting the floor without any margin for slow months or late payments.

FAQ

Frequently asked questions

Why is the day rate based on 8 hours?

It is a common convention for a full billable day. If your clients expect fewer billable hours in a day, multiply the hourly rate by that number instead.

What if my business costs are not tax-deductible?

Then tax also falls on the money that pays them, and revenue = (take-home + costs) ÷ (1 − tax rate). With these defaults that gives about $109,722 instead of $106,222.

Sources: IRS — Self-Employed Individuals Tax Center · 국세청 — 종합소득세 안내