Your freelance rate must cover three things: your desired personal income, your business costs, and your tax obligations. Many freelancers undercharge because they only think about the income they want, forgetting that as a freelancer you have no employer paying your pension, social security, or expenses.
The Formula
Gross Revenue Needed = (Net Income + Expenses) / (1 - Tax Rate) Day Rate = Gross Revenue Needed / Billable Days Hourly Rate = Day Rate / Hours Per Day
This gives your minimum break-even rate. Always add a buffer of at least 20% on top.
Why Billable Days Matter
You will never bill for every working day. Time spent on admin, proposals, invoicing, business development, training, and gaps between contracts typically accounts for 15 to 25% of your working year. A freelancer targeting 220 working days should plan for approximately 165 to 185 billable days.
Freelance Rate Examples
Minimum hourly rate to achieve net income of 60,000, based on 176 billable days and 8 hours per day.
Country
Tax Rate
Expenses
Gross Needed
Hourly Rate
Netherlands (ZZP)
28%
5,000
90,300
64
Belgium
42%
5,000
111,200
79
Germany
35%
5,000
100,000
71
United Kingdom
30%
4,000
91,400
65
United States
32%
5,000
95,600
68
Frequently Asked Questions
How is a freelance rate different from an employee salary?+
As an employee, your employer pays for your office, equipment, insurance, pension, and social security on top of your gross salary. As a freelancer you pay all of these yourself. A freelancer needs to charge 1.5 to 2 times the equivalent employee hourly rate to achieve the same net income.
What tax rate should I use?+
Use your estimated effective rate including all income tax and social security. For Netherlands ZZP freelancers around 60,000 net, 25 to 30% is a reasonable estimate after deductions. For Belgium self-employed, 35 to 45%. For UK sole traders above the basic rate threshold, 30 to 35%. For US self-employed, add 15.3% self-employment tax to your marginal federal rate.
Should I charge a day rate or an hourly rate?+
Day rates are standard for consultants, developers, and designers on longer contracts. Hourly rates work for shorter tasks or uncertain scope. Project-based pricing can yield significantly higher effective rates when you are efficient at the work. Many freelancers set both: a day rate for longer engagements and an hourly rate for ad hoc work, with the hourly rate slightly higher than day rate divided by eight.
How do I raise my rate with existing clients?+
Give at least one month notice before any rate increase. Frame it around increased experience, inflation, and the value you deliver rather than personal need. A 5 to 10% annual increase is generally accepted without friction. Larger increases are easier to justify when starting a new contract or project. New clients should always be quoted your current rate regardless of what you charge existing clients.