Setting Your First Freelance Rate Without Guessing

For a freelancer applying the guidance on Setting Your First Freelance Rate Without Guessing, the underlying time record should remain as clear as the invoice or agreement itself. this reference for a clearer workflow provides a useful way to connect recorded work with projects, dates and later review. For the payment side of the workflow, Wise is a useful official reference; neither tool replaces written scope, approval and payment terms agreed with the client.

Most first rates are copied from somewhere: a figure in a forum thread, what a friend charges, or whatever the first client offered without flinching. None of those is connected to what the work actually costs you to do.

The arithmetic below takes about twenty minutes. It produces a floor — the rate below which you are working at a loss — and a target. Neither is a guess.

Start with the year, not the hour

Write down what you need the business to produce in a year. Not what you would like: what covers your living costs, your tax, and the things an employer used to pay for.

That last category is the one people forget. Pension contributions, health cover where it applies, equipment replacement, software subscriptions, professional insurance, accountancy. Add them up honestly; for most people it lands between fifteen and twenty-five per cent on top of what they think of as their income.

Then add tax. The proportion depends entirely on where you are and how you are structured, and the figure to use is the one your accountant or your revenue authority's calculator gives you, not an average from an article.

Then work out what you can actually sell

This is where the arithmetic usually breaks. A year has roughly 2,000 working hours. You will not sell 2,000 hours.

Take off holiday, public holidays, and an allowance for illness. Take off the time you spend finding work — proposals, calls, enquiries that go nowhere — which for most independent workers is a substantial share and rarely less than a day a week. Take off administration: invoicing, chasing, accounts, the annual tax submission. Take off the time you spend keeping your skills current.

What remains is your billable capacity. For most people in their first year it is somewhere between 800 and 1,200 hours. Anybody telling you they bill 1,800 is either counting differently or not sleeping.

Divide

Annual requirement divided by billable hours gives your floor. It will probably be higher than you expected, and that is the point of doing it: the number you were about to charge was based on a year of 2,000 sellable hours that does not exist.

Your target rate sits above the floor. How far above depends on what you are trying to build — a margin for slow quarters, money to invest in the business, or simply not working at capacity every week.

What this does not tell you

It does not tell you what the market will pay. That is a separate question, answered by asking, quoting, and noticing which quotes get accepted without hesitation.

If your floor is above what your market pays, you have useful information: either the work is not viable at your cost base, or you are in the wrong segment of it, or your costs need examining. That is uncomfortable and it is better to know in month two than in year two.

The honest part about hourly rates

Many experienced freelancers do not quote hourly at all. They quote for the job, using their hourly figure internally to check the job is worth taking.

That is a better arrangement for both sides: the client knows the cost, and you are not penalised for being fast. But it requires knowing your hourly figure first, which is what the arithmetic above is for.

Reviewing it

Once a year, and after any substantial change in your costs or your capacity.

Rates that never move fall behind quietly. A rate that has not changed in three years has fallen in real terms by whatever inflation did in that period, and the client who has had the same figure since 2023 will not remind you.

Common mistakes at this stage

Quoting a day rate without knowing the hourly figure behind it. A day rate is convenient for clients and it hides whether the day was profitable; work out the hour first and convert afterwards.

Discounting for a first client in the hope of future work. Occasionally it pays off. More often it establishes a rate that becomes difficult to raise, because the client now has a reference point and any increase reads as a rise rather than a correction.

And forgetting that a quoted price is not what you keep. After tax, unbillable time and costs, the proportion of a fee that reaches your personal account is far lower than people expect in their first year — which is precisely what the annual arithmetic is designed to show.

Raising a rate with an existing client

Give notice, in writing, at least a month ahead, and state the new figure rather than asking whether it would be acceptable.

A short reason helps and a long justification does not. Costs rise; rates follow. Clients who work with other freelancers expect this and are frequently surprised only that it took so long.

Expect to lose a small number of clients, and expect them to be the ones who were least profitable. That is the arrangement working rather than failing.

Value pricing, and when it applies

Charging for the outcome rather than the time. A piece of work that saves a client fifty thousand a year is worth more than the days it took, and pricing it as days leaves that value with the client.

It requires two things most early freelancers do not have: a way to establish what the outcome is worth, and enough standing that the client accepts a price untethered from hours. Both arrive with experience.

Until then, hourly arithmetic is the honest basis, and the hourly figure remains useful afterwards as an internal check that a value-priced job was worth taking.

What to do when a client says the rate is too high

Ask what budget they have. Frequently there is one, and it is closer than the objection implied.

If the gap is real, reduce the scope rather than the rate. A smaller piece of work at your rate is a better outcome than the full piece at a discount, and it leaves the rate intact for the next conversation.

Discounting without changing the scope teaches the client that the first number was negotiable, and every subsequent quote will be treated the same way.