Guide

How to Set Your Freelance Hourly Rate (2026)

Most new freelancers set their rate by halving a salary figure - and quietly go broke, because that ignores taxes, unpaid time and the fact that you cannot bill 40 hours a week. Here is the formula that actually works in 2026.

The formula

Hourly rate = (target annual income + business costs + taxes) ÷ billable hours per year.

The trap is in the last term. You do not bill every working hour - admin, sales, breaks and gaps mean a full-time freelancer often bills only 20–25 hours a week, not 40. Price against the hours you can actually invoice.

Work through it

  • Target income - what you want to take home.
  • Business costs - software, equipment, insurance, subscriptions.
  • Taxes - self-employment tax is higher than payroll; set aside a realistic share.
  • Billable hours - be honest: maybe 1,000–1,200 a year full-time after non-billable work.

Divide and you get a rate that covers your real life, not a salary fantasy.

Then price projects, not just hours

Once you know your hourly floor, value-based or fixed project pricing usually earns more. But you still need the floor to know whether any project is worth your time.

The Plannful Bookkeeping & Pricing spreadsheet runs this formula from your inputs and helps you price both hourly and per-project - in Excel or Google Sheets.

See Bookkeeping & Pricing →

Tracking clients and income too? Pair it with the Freelancer Tracker.

Frequently asked questions

How do I calculate my freelance hourly rate?
Add your target annual income, business costs and taxes, then divide by the hours you can actually bill in a year. Because admin and sales eat into your week, a full-time freelancer often bills only 20-25 hours weekly, so price against billable hours, not a 40-hour week.
Why shouldn't I just halve my old salary to get my rate?
A salary hides employer-paid taxes, benefits and paid time off, and assumes 40 paid hours a week. Freelancers cover their own taxes and benefits and bill far fewer hours, so a halved-salary rate usually leaves you earning less than you think.
Should freelancers charge hourly or per project?
Know your hourly floor first, then prefer fixed or value-based project pricing where you can - it usually earns more and rewards efficiency. The hourly rate remains the check for whether a project is worth taking.

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