How to Calculate Your Freelance Hourly Rate After Tax

Updated October 2026 · 6 min read

Most new freelancers pick a rate by looking at what employees earn, or by copying a number from a forum. Then tax season arrives, and the money that landed in the bank is far lower than expected. The cause is almost always the same: the rate was never worked out from the income they actually need.

This guide gives you a simple formula, a worked example, and the mistakes that quietly cost freelancers thousands every year.

The formula

It works in four steps:

1. Pick your take-home goal. The money you want to keep each year after tax. Think of it as your salary.
2. Add the tax back. Divide your goal by (1 − tax rate). If you want to keep 60,000 and expect to pay 25% tax, you must earn 80,000 before tax.
3. Add business costs. Software, equipment, insurance, an accountant. Not personal living costs.
4. Divide by billable hours. Only the hours you can actually charge clients for, not every hour you work.

A worked example

Say you want to take home 60,000 a year, expect 5,000 in business costs and a 25% tax rate. You work 40 hours a week, 60% of that time is billable, and you take 6 weeks off.

Compare that with the usual shortcut of dividing a 60,000 salary by 2,080 working hours, which gives about 29 an hour. The real rate is more than two and a half times higher.

Why the salary shortcut fails

An employee's hourly wage hides several costs that a freelancer must cover personally:

• Tax and social contributions. There is no employer paying part of it or handling it for you.
• Paid leave and sick days. When you don't work, you don't earn.
• Unpaid work. Finding clients, sending quotes, invoicing and learning all take time you can't bill.
• Business costs. Equipment, software, insurance and accounting.

Your billable share changes everything

The most important number in the formula is the share of your week you can bill. Using the same example, here is what happens when only that one number changes:

If you are just starting out and spend much of your time finding clients, expect a lower billable share and plan your rate around it.

Tax is not one flat number

The example used a flat 25% to keep the maths clear, but real income tax is progressive: higher slices of income are taxed at higher rates. Self-employed people also often pay social contributions, such as self-employment tax in the US, Class 4 National Insurance in the UK, or national insurance and health tax in Israel. Because of this, the same take-home goal needs a different rate in different countries, and the tax share grows as your income grows.

That's why our calculator applies real tax brackets for several countries instead of one flat guess. It also converts your rate into the currency your clients pay in.

Common mistakes

• Using the tax rate you pay as an employee. Self-employed contributions usually make the total higher.
• Assuming 100% of your week is billable. It never is.
• Forgetting time off. Holidays and sick days are unpaid.
• Quoting exactly your minimum. Add a buffer of about 15% for discounts, late payments and surprises.
• Never recalculating. Revisit your rate every 6 to 12 months or when your costs change.

Frequently asked questions

Should I charge hourly or per project?

Work out your hourly rate first either way. For a fixed-price project, multiply the hours you expect by your rate and add a cushion of 20 to 30% for revisions and unknowns.

What tax rate should I use?

Use your effective rate, which means income tax plus social contributions as a share of your profit. If you are unsure, use the calculator with your country, or ask an accountant.

Why is a freelance rate higher than an employee's wage?

Because it must also pay for tax, leave, unpaid time and business costs that an employer would otherwise cover or that are hidden inside a salary.