Step 1: Set your annual take-home goal

Before calculation your freelance hourly rate you must define one number:

So your take home pay which is the money you get to keep after:

• Taxes
• Business expenses
• Software subscriptions
• Insurance
• Retirement contributions

Revenue would be the total amount of money you generate from sales before any expenses is being done. Take-home-pay is the actual money that you get to keep after taxes,deduction has been paid. Obviously this vary much depending in which country you live in (the level of taxes)

Typical Take-Home Ranges by Business Type

Your margin depends heavily on your model.

Low Expense / High Margin
(Consulting, freelance services, digital work)
→ Take-home can be 60%–85% of revenue

Average Contractor / Service Business
→ Setting aside 30%–40% of revenue for taxes and operating costs is common

High Expense / Low Margin
(Retail, ecommerce, food, physical goods)
→ Take-home may be only 5%–20% of revenue

As a service freelancer (design, development, writing, consulting), you’re usually in the higher-margin category — but taxes still matter.

And taxes vary significantly depending on:

• Country
• Business structure
• VAT obligations
• Social contributions

Practical Rule of Thumb

If you are unsure, start by:

1. Setting your desired take-home income.
2. Adding a 30–40% buffer for taxes and business costs.
3. Using that total as your revenue target.

Example:

If you want to take home €60,000:

€60,000 ÷ 0.7 ≈ €85,700 revenue target

That’s the number you use in your hourly rate formula.

Step 2: Add you annual business costs

Let us now calculate what your business must generate.

Even solo freelancers have many costs that are underestimated - reason why most freelancer underprice

Typical annual business costs include:

• Software subscriptions (design tools, dev tools, CRM, invoicing)
• Laptop, gear, upgrades
• Hosting, domains
• Coworking space or home office costs
• Accountant / bookkeeping
• Marketing (ads, website, branding)
• Payment processing fees
• Insurance
• Training and courses

If you do not know the exact number, estimate conservatively. Your hourly rate must cover take-home goal + business cost.

Step 3 - Add a tax buffer

Now add a safety margin.

When I was freelancing, I had to account for:

• Income tax
• Social contributions
• VAT handling
• Retirement contributions

Income tax varies depending on your country and declared income.
VAT should almost always be charged on top of your rate — never absorbed into it. In some countries, VAT can be as high as 25%, and that tax belongs to the customer, not you.

Instead of calculating country-specific tax law here, use a simple buffer approach:

Set aside 25%–40% of revenue, depending on your situation.

Your real percentage depends on:

• Country
• Business structure
• Income level
• Deductible expenses

We’ll publish country-specific calculators later.

For now, build margin into your pricing.
Underestimating taxes is one of the fastest ways to create financial stress.

Step 4 - Calculating your real billable hours

That is were most freelancers get it wrong. They would assume to calculate their billable hours by counting the weeks they are not on holidays or sick and multiply by 40 (or what ever your amount of working hours would be).

But you need to substract:

• Admin
• Sales calls
• Proposals
• Marketing
• Learning
• Client communication

Most freelancers realistically bill:

Sometimes less.

If you want help calculating this precisely, use our
Billable Hours Calculator (coming soon)

This number will massively impact your hourly rate.

Step 5 - Apply the formula

Example

Example 1: €50,000 take-home goal:

Let’s assume:

Take-home goal: €50,000
Business costs: €10,000
Tax buffer: €20,000
Billable hours: 1,200

Total required revenue: €80,000

€80,000 ÷ 1,200 = €67/hour

Example 2: €90,000 take-home goal:

Take-home goal: €90,000
Business costs: €20,000
Tax buffer: €35,000
Billable hours: 1,100

Total required revenue: €145,000

€145,000 ÷ 1,100 = €132/hour

Higher income + fewer billable hours = higher rate.

This is why experienced freelancers charge more — not because they’re greedy, but because their economics are different.

7 Common mistakes when setting your freelance rate

1. Assuming 2,000 billable hours
2. Ignoring admin time
3. Forgetting tax buffer
4. Not counting unpaid sales calls
5. Pricing like an employee salary
6. Not charging for scope creep
7. Failing to review your rate quarterly

Most underpricing is a math problem — not a confidence problem.

What’s a realistic freelance hourly rate range?

There is no universal number.

Your rate depends on:

• Skill level
• Specialization
• Demand
• Geography
• Risk
• Client type

If your rate:

• Covers costs
• Covers taxes
• Pays your take-home goal
• Leaves margin for growth

Then it’s realistic.

If it doesn’t — it’s too low.

If you want Netherlands-specific or developer-specific benchmarks, we’ll cover those in separate guides.

FAQ

How do I calculate my hourly rate as a beginner freelancer?

Start with your desired annual take-home income. Add estimated business costs and a tax buffer. Divide the total by realistic billable hours per year.

How many billable hours should I assume per year?

Most freelancers realistically bill between 1,000 and 1,400 hours per year, depending on workload and admin time.

Should taxes be included in my hourly rate?

Yes. If you don’t include taxes in your pricing model, you will undercharge.

Is a day rate better than an hourly rate?

A day rate simplifies quoting, but it should still be based on your calculated hourly rate.

How often should I raise my freelance rate?

Review your rate at least once per year, or when demand increases significantly.

If you want the fastest answer, use the
Freelance Hourly Rate Calculator