How to Set Your Freelance Rate When You're Just Starting Out
The first time a client asked me “what’s your rate?”, I froze, said a number that sounded big to me, and immediately regretted it — because I’d plucked it out of thin air. It was too low, and I spent the next year quietly resenting a project I’d underpriced myself into.
Nobody says this out loud when you start freelancing: your rate isn’t a number you guess. It’s a number you calculate. And once you’ve done the maths once, the fear mostly goes away, because you can defend it.
Why copying someone else’s rate fails
The advice you’ll see most often is “go look at what others charge.” It feels safe, but it’s how people end up underpaid. Someone else’s $45/hour might be fine for them — maybe they have a partner’s income, a paid-off laptop, and live somewhere cheap. You don’t know their costs, their tax situation, or how many hours they actually bill. Copying their number copies none of the things that made it work.
A rate has to fit your life. So start there.
Work backwards from the life you want
The honest method has four steps. Do them in order.
- Decide what you want to take home. Not revenue — take-home. The money that lands in your account after tax. Be concrete: a yearly figure you could actually live on. Say it’s $50,000.
- Add tax back on. You pay tax on your profit, so you have to earn more than you keep. If you set aside, say, 28% for tax, you need about
$50,000 ÷ (1 − 0.28) = $69,400before tax. (Your real rate depends entirely on where you live — more on that below.) - Add your business costs. Software, hardware, insurance, your accountant, that subscription you forgot about. If they run to $5,000 a year, you now need to bill about $74,400.
- Divide by the hours you can actually bill. This is where almost everyone trips up.
The billable-hours trap
A full-time job is ~2,080 hours a year. So new freelancers divide by 2,080 and get a rate that looks reasonable — and is a disaster.
You will not bill 2,080 hours. You have to find clients, answer emails, send invoices, do your books, take holidays, and occasionally be ill. In practice, even busy full-time freelancers bill 25–30 hours in a 40-hour week, across maybe 46 working weeks once you remove time off. That’s roughly 1,150–1,380 billable hours a year, not 2,080.
Take our $74,400 and divide by 1,150 hours: about $65/hour. Divide by the fantasy 2,080 instead and you’d get $36 — and you’d slowly go broke at $36.
If doing this by hand feels fiddly, that’s exactly what the freelance hourly rate calculator is for — it runs these four steps instantly and shows the full breakdown.
About that 28% — where you live changes everything
The 28% in step 2 is a deliberate placeholder, not a recommendation. Your real set-aside depends on your country (often your state or province too), on whether you owe self-employment or social-security contributions on top of income tax, and on how your business is structured. A sole trader in Texas, a freelancer in Berlin and a contractor in Ontario can do identical work for identical money and still need three noticeably different percentages. VAT or GST registration adds another wrinkle — that’s tax you collect on top of your rate, separate from what you keep.
The good news: the method doesn’t change, only the number does. Look up the brackets and contribution rates where you live, pick a percentage that’s honestly a little pessimistic, and re-run the four steps with it. I keep a whole guide on how much to set aside for tax with worked figures if you want help picking that percentage.
One important caveat: everything on this page is general information and a rough planning estimate, not tax or financial advice. Confirm your actual numbers with your country’s tax authority or a qualified accountant before you build your pricing on them.
”But no one will pay me that as a beginner”
Two things are true at once. First, the number you just calculated is your floor — the rate that merely keeps you whole. It is not arrogant; it is arithmetic. Second, when you’re brand new you may choose to go below your floor for a short while to build a portfolio and testimonials. That’s a legitimate strategy — just do it with your eyes open, knowing it’s an investment, not your real price.
What you should not do is invent a low number out of fear and then discover, months later, that you’ve been paying to work.
A quick gut-check before you send the number
- Would this rate, at realistic hours, actually pay your bills? If not, it’s too low — full stop.
- Did you include tax and costs? The two things beginners forget.
- Are you quoting a project or an hour? Use the hourly figure privately to size a project, then quote most jobs as a fixed price (estimated hours × rate, plus a buffer for revisions). At $65/hour, a job you estimate at 20 hours plus a 15% revision buffer comes out around $1,500 — quote that, not the hourly rate. Clients prefer a predictable total, and it rewards you for working fast.
Raise it on a schedule, not by accident
Set a reminder to revisit your rate every 6–12 months. Costs creep up, you get faster and better, and your early “portfolio-building” discount should expire. Re-running the same calculation with new numbers makes a raise feel like a decision, not a confrontation.
The one-line version
Take-home you want → add tax → add costs → divide by the hours you can really bill. That’s your floor. Charge from there, not from a forum.
Once you’ve got your number, the next practical step is getting paid for it cleanly — which is a whole separate skill, and one worth getting right from invoice number one.