How much should you charge as a freelancer? Working out a day rate that pays the bills

Why "what does everyone else charge?" is the wrong first question

Other people's rates tell you what the market will bear. They do not tell you whether that rate works for you. A designer with a partner who covers the mortgage and a designer supporting a family can quote the same number, and only one of them is fine.

Start from your own numbers, then check them against the market. If the two are far apart, that tells you something useful. Either you need to find clients who pay more, or you need to change what you sell.

Step 1: how many days can you actually bill?

This is the number people get most wrong, because they assume something close to a full-time job. Start with the year and take things away.

Then the part that is easy to forget. Not every working day is billable. You also quote, invoice, chase, answer emails, update your portfolio, do your accounts and look for the next job. For most freelancers that takes somewhere between a quarter and half of their time, and more in the first year.

At 65% billable, those 217 working days become about 141 billable days. That is your real denominator. If you prefer to think in hours, call it six billable hours a day. Very few people manage eight hours a day of client work for long.

Step 2: what do you need the business to make?

Add up three things.

What you want to pay yourself. If you are leaving employment, your old salary is a reasonable anchor. Remember that an employer was also paying national insurance and pension contributions on top of it, and you now get neither.

Your business costs. Software, equipment and its replacement, insurance, an accountant, a phone, travel, training, a co-working desk, professional memberships, advertising. Go through last year's bank statements rather than guessing. Small monthly subscriptions add up fast.

A pension and a buffer. No employer is matching your pension contributions now. And freelance income is lumpy, so a few months of savings is what lets you turn down a bad client.

Step 3: divide, then round up

A worked example, for a freelancer replacing a £40,000 salary:

£50,200 divided by 141 billable days is £356 a day. Round it to £360 or £375. At six billable hours a day, that is about £60 an hour.

That is your floor, not your price. Charging it means the business pays you what your old job did. It does not mean it is doing well.

Note that income tax and national insurance are not in the table. That is deliberate. They come out of the £40,000, just as they did when you were employed. What changes is that nobody takes them at source. Many freelancers move a fixed share of every payment into a separate tax account as it arrives, so January does not come as a shock.

Day rate, hourly or fixed price?

Hourly suits work that is open-ended or hard to scope, such as support, ongoing edits or ad hoc consulting. The risk sits with the client, but they will query every line, so log your time properly against tasks.

A day rate suits work you do in blocks, such as shoots, workshops or on-site days. It sounds more senior than an hourly rate and saves arguing over twenty minutes here and there.

Fixed price per project is where experienced freelancers tend to end up. You price the outcome, not the time. If you get faster, you earn more. The risk is scope creep, so a fixed price needs a tight scope and a clear revisions clause. Our freelance contract checklist covers both.

A practical approach is to use your day rate to build a fixed quote. Estimate the days, multiply, add a contingency of 10 to 20% for the unknowns, and send the client one number.

Checking it against the market

Now look outward. Useful sources include:

• job boards and agency listings that show rates, for your trade and your region
• surveys published by professional bodies in your field
• other freelancers. Most will tell you their rate if you tell them yours.

If the market is well above your floor, good. Charge nearer the market. If it is below, do not just accept it. Look at whether a niche, a sector or a type of client pays more. A copywriter who writes for SaaS companies and one who writes for anyone are often in different price brackets, for the same hours.

Raising your rates

Raise your rates once a year at least. Your costs do. Some practical habits:

• New clients get the new rate straight away. No announcement needed.
• Existing clients get notice. Thirty to sixty days in writing is courteous. A short line on why is enough: "From 1 January my day rate will be £400. Any work booked before then stays at the current rate."
• Do not apologise and do not over-explain. A rate rise is normal business. Most clients will simply update their budget.
• Expect to lose a client occasionally. If a rise loses your lowest-paying client, it has often done its job.

Know what a job actually earned you

The rate you quote and the rate you earn are different numbers. A fixed-price job that took twice as long as you estimated paid you half your day rate, and you only find that out if you track the hours, including the ones you do not bill.

That is the main reason to log time even on fixed-price work. In Panorivo you can log billable and non-billable hours against the task they belong to. The reports show hours by client and project alongside what came in, which is all you need to work out what each one really paid per hour. After a few months you will know which kinds of job to quote higher, and which clients to quietly stop chasing. It is free, and your data exports to CSV whenever you want it.