Finance
Hourly Rate Calculator
Work out the hourly rate you need to charge from your target income, business expenses, billable hours, and a buffer for taxes and profit. Free, instant, no signup.
Enter your target income and billable hours to see the rate you need to charge.
All calculations happen in your browser. Nothing is stored.
✳ Free · No signup · Runs in your browser — we never store your numbers
Small business guide
What this tool helps you do
Use this free hourly rate calculator to answer the question every freelancer and consultant wrestles with: what should I actually charge per hour? It works backward from the income you want to take home, not forward from a number that "feels about right."
Charging by the hour only works if the rate covers your target pay, your business expenses, the taxes you owe, and the hours you can't bill. This tool bakes all of that in so the number you quote actually leaves you with the income you planned for.
How to use this tool
- 1
Enter your desired take-home income — the salary you want to pay yourself for the year, before tax.
- 2
Enter your annual business expenses — software, equipment, insurance, subscriptions, home office, accounting, and anything else it costs to run the business.
- 3
Enter your billable hours per week. Be honest: most freelancers bill only 50–70% of their working hours because admin, sales, and marketing are not billable.
- 4
Enter your working weeks per year — 52 minus holidays, sick days, and downtime. Many freelancers use 46–48.
- 5
Add a tax and profit buffer as a percentage to gross up the rate for taxes, non-billable overflow, and a profit cushion.
Formula
Billable hours per year = billable hours per week × working weeks per year. Revenue needed = (desired income + business expenses) ÷ (1 − buffer%). Hourly rate = revenue needed ÷ billable hours per year.
- The buffer divides rather than adds: a 25% buffer means the base covers only 75% of revenue, so revenue needed = base ÷ 0.75.
- Lowering billable hours raises your rate — if you can only bill 25 hours a week, each hour has to carry more.
- Business expenses are recovered across billable hours too, so higher overhead means a higher rate.
- This gives a floor, not a ceiling. Charge more if the market and your value support it.
Examples
Solo freelance designer
A freelance designer wants to take home $60,000, spends $6,000 a year on tools and software, bills 30 hours a week, and works 46 weeks a year.
Inputs
- Desired income: $60,000
- Expenses: $6,000
- Billable hours per week: 30
- Working weeks per year: 46
Result
Billable hours per year are 1,380 and the rate needed is about $47.83 per hour with no buffer.
$47.83 only covers pay and expenses. It does not set aside anything for taxes, so it is a bare minimum, not a target rate.
Adding a tax and profit buffer
Same designer, but adding a 25% buffer for self-employment tax and a small profit cushion.
Inputs
- Desired income: $60,000
- Expenses: $6,000
- Billable hours per week: 30
- Working weeks per year: 46
- Buffer: 25%
Result
Revenue needed rises to $88,000 and the rate becomes about $63.77 per hour.
The buffer is the difference between a rate that looks fine and one that actually leaves money after tax. Round up to $65–$70 to give yourself room.
Key terms
Billable hours
The hours you can actually invoice a client for. Non-billable time — admin, sales, marketing, learning — is real work but does not directly earn revenue.
Tax and profit buffer
A percentage added on top to cover taxes, the gap between working and billable hours, and profit. It grosses the rate up so your take-home target survives real-world costs.
How to interpret the result
Treat the result as a floor
The calculated rate is the minimum that keeps you solvent at your target income. Your actual rate should usually be higher — pricing on value, experience, and demand rather than just covering costs.
Low billable hours are the hidden driver
Freelancers routinely overestimate how many hours they can bill. If you plan for 40 but bill 25, your effective rate collapses. Set billable hours honestly, then price to that reality.
Common mistakes
- Copying a salaried hourly wage (annual salary ÷ 2,080) and quoting that — it ignores expenses, taxes, and non-billable time.
- Assuming you can bill 40 hours a week; most sustainable freelancers bill 25–32.
- Forgetting self-employment and income taxes, which the buffer is meant to cover.
- Never revisiting the rate as expenses, skills, and demand grow.
Frequently asked questions
How do I calculate my freelance hourly rate?+
Add your target take-home income and annual business expenses, divide by the number of hours you can actually bill in a year, then gross the result up for taxes and profit. This calculator does all three steps for you.
Why is my calculated rate higher than a normal salary wage?+
Because a freelance rate has to cover expenses, taxes, benefits, and non-billable hours that an employer would otherwise absorb. A $50/hour freelance rate is not comparable to a $50/hour salaried wage.
How many billable hours should I assume?+
Most full-time freelancers realistically bill 25–32 hours a week once admin, sales, and marketing are accounted for. Using 40 will make your rate too low.
What should I include in business expenses?+
Software subscriptions, equipment, insurance, professional services, marketing, a share of home-office costs, and any other recurring cost of running the business.
Should I charge hourly or by project?+
Use this rate as your baseline either way. For project pricing, estimate the hours, multiply by this rate, and add a margin for scope risk. Value-based pricing can go well beyond the hourly floor.