How to set your freelance rate (what to charge)

“How much should I charge?” is the question almost every freelancer gets wrong at the start — usually by pricing too low. The fix is to stop guessing and work backwards from the life you want to fund.

Why a freelance rate isn’t a salary hourly wage

If you earned $60,000 as an employee, that’s roughly $30/hour — so it’s tempting to charge $30–40 and feel generous. That’s a trap. As a freelancer you also cover:

• Your own tax (no employer withholding it for you);
• Business expenses — software, equipment, insurance, fees;
• Non-billable time — admin, sales, invoicing, learning;
• Time off — holidays, sick days, gaps between projects.

And you’re only paid for billable hours, which for most full-time freelancers is 20–30 a week, not 40. Your rate has to absorb all of that.

The work-backwards method

1. Start with target take-home pay. What do you want to keep for the year?
2. Gross it up for tax. If you set aside ~25%, divide take-home by 0.75.
3. Add business expenses. That total is the revenue you need to invoice.
4. Divide by realistic billable hours. e.g. 25 h/week × 46 weeks ≈ 1,150 hours.

Example: $60k take-home ÷ 0.75 = $80k, + $6k expenses = $86k to invoice. $86k ÷ 1,150 billable hours ≈ $75/hour (about a $450 day rate at 6 billable hours).

That’s far above the “$30/hour” instinct — and it’s the floor, not the ceiling. Run your own numbers with the freelance rate calculator.

Then price by value, not just hours

The calculation gives you a floor — the rate below which you’re losing money. Above it, charge for the value and outcome, not the hours: a logo that wins a client millions isn’t priced by time. Where you can, quote a fixed project price (it rewards efficiency and is easier for clients to approve) rather than billing hourly.

Common mistakes

• Anchoring to an employee salary — it ignores tax, expenses and downtime.
• Assuming 40 billable hours — sets your rate ~40% too low.
• Never raising rates — review annually and on every new client.
• Competing on being cheapest — it attracts the worst clients and a race to the bottom.

Now lock it in

Once you know your rate, put it to work: send a clear quote, lock the scope and payment terms into a contract, then invoice it. And read how to write a quote and how to prevent scope creep so the rate you set is the money you actually keep.