Freelancer Pricing and Profitability
Set prices that cover your real costs — including taxes, tools, and the hours you don't bill.
Many freelancers price their work the way employees think about salary — and end up underearning. Real freelance pricing must cover taxes, tools, time off, and unpaid admin hours.
The concept
Out of a working year, only a portion of hours are actually billable. The rest go to sales, admin, learning, sick days, and holidays. Your billable rate must cover all of them.
Simple formula
Hourly Rate = (Target Income + Costs + Taxes) ÷ Billable Hours per Year
Why it matters
- Prevents quoting prices that look fine but lose money.
- Builds in time for holidays, sickness, and slow months.
- Gives you a clear floor for negotiations.
Practical example
A freelancer wants €40,000 take-home, has €4,000 of yearly costs and expects €12,000 in taxes. They estimate 1,000 billable hours per year. Hourly rate = (40,000 + 4,000 + 12,000) ÷ 1,000 = €56/hour as a minimum.
How to interpret
- If clients won't pay that rate, you need either more efficiency or a different niche.
- Project pricing should never go below this hourly floor.
Next steps
- Recalculate every year.
- Track actual billable hours for one month to test your estimate.
Open the Profitability calculator →
This guide is for educational and planning purposes only. It is not accounting, tax, legal, investment, or financial advice.