Most freelancers underprice themselves because they compare their rate to an employee salary. That's backwards. Your rate needs to cover much more.

The Reality of Billable Hours

You cannot bill 40 hours per week. Even if you work 40 hours, only 15-25 are typically billable.

The rest goes to:

If you want £50,000 take-home and bill 20 hours per week for 48 weeks (4 weeks holiday), that's only 960 billable hours per year.

£50,000 ÷ 960 = £52/hour minimum

But that's not your rate yet.

The Real Cost Formula

Target Rate = (Desired Income + Annual Overhead) × (1 + Tax Buffer %) ÷ Billable Hours

Example: Freelance Copywriter

Desired income: £60,000

Annual overhead:

Pre-tax requirement: £60,000 + £5,360 = £65,360

Tax buffer (30%): £65,360 × 1.30 = £84,968

Billable hours: 20/week × 48 weeks = 960 hours

Required rate: £84,968 ÷ 960 = £88.50/hour

Round up to £90/hour or £650/day (8 hours).

Why You Feel Weird Charging That Much

You're thinking: "That's £187,200 per year if I worked full-time!"

Wrong. You won't bill 40 hours per week. You'll bill 20-25. Your actual revenue will be £86,400-£108,000. After taxes and overhead, you'll take home your £60,000.

Employees cost businesses way more than their salary too. A £60,000 employee costs the company £75,000-£90,000 with benefits, taxes, equipment, and management overhead.

You're not overcharging. You're pricing correctly.

Adjusting for Experience

Just starting: Multiply by 0.7-0.8

(£90 × 0.75 = £67.50/hour, £500/day)

Established (3-5 years): Use calculated rate as-is

Expert (5+ years): Multiply by 1.2-1.5

(£90 × 1.3 = £117/hour, £850/day)

What If Clients Won't Pay That?

Three options:

1. Find better clients (enterprises pay more than startups)

2. Package your services (sell outcomes, not hours)

3. Lower your expenses (work from home, cheaper tools)

Never lower your rate to appease cheap clients. They'll never respect your time, and you'll resent the work.

Day Rates vs. Hourly

For projects over 8 hours, offer day rates (6-8× hourly rate).

£90/hour = £650/day

This is more attractive to clients (predictable cost) and more profitable for you (work tends to expand to fill time).

The Psychological Price Barrier

£50-75/hour: Junior level

£75-120/hour: Mid level

£120-200/hour: Senior level

£200-500+/hour: Expert level

Pick the bracket that matches your experience and skill, not what feels "nice" or "fair."

Raising Your Rates

Start with new clients only. Test a 15-20% increase. If 80%+ still say yes, your rate is too low.

For existing clients, announce increases 60 days in advance. Most will accept it. Some won't. That's okay—you'll replace them with higher-paying work.

The Bottom Line

Your rate is not your salary. It's your revenue stream that must cover:

Use our Hourly Rate Calculator to find your real target rate.