Quick answer. Hourly rate = (take-home pay ÷ (1 − tax %) + business expenses) ÷ billable hours per year. Example: 50,000 take-home, 25% set aside for tax, 6,000 expenses, 40 hours a week for 46 weeks with 60% billable = 72,666.67 ÷ 1,104 hours = 65.83 an hour.
How to use the hourly rate calculator
- Pick a mode. “Rate I need to charge” works backwards from the pay you want. “Convert pay” turns an hourly wage into daily, weekly, monthly and yearly pay, or the other way round.
- Enter the take-home pay you want for a year, after tax. Think of it as the salary you would accept from an employer, plus the benefits you now have to fund yourself, such as a pension and paid leave.
- Add your yearly business expenses: software subscriptions, equipment, insurance, a share of rent and utilities, accounting, marketplace subscriptions and anything else you pay that clients or buyers do not pay you back for.
- Set a tax set-aside percentage. This is the share of profit you put aside for income tax and, in the US, self-employment tax. It depends on where you live and how much you earn, so check with your tax authority or an accountant.
- Enter your working time: hours and days per week, and weeks off for holidays and sickness. Then set the billable share, the part of that time you can actually charge for.
- Add an optional buffer for quiet months or profit, and choose how to round. The result shows the hourly rate, a full-day rate and the yearly revenue it needs.
The hourly rate formula, step by step
The calculator follows four steps that you can check by hand:
- Profit before tax = take-home pay ÷ (1 − tax set-aside). With 50,000 and 25%: 50,000 ÷ 0.75 = 66,666.67. Of that, 16,666.67 is kept for tax.
- Revenue needed = profit before tax + business expenses = 66,666.67 + 6,000 = 72,666.67 a year (plus any buffer).
- Billable hours = hours per week × (52 − weeks off) × billable share = 40 × 46 × 60% = 1,104 hours.
- Hourly rate = revenue needed ÷ billable hours = 72,666.67 ÷ 1,104 = 65.82, rounded up to 65.83 so the target is never missed by a few cents.
The same person paid 50,000 for all 1,840 working hours would earn about 27.17 an hour, which is why a self-employed rate can look high next to a salary. The gap pays for tax, expenses, unpaid admin time and holidays.
Why billable hours matter most
Most self-employed people cannot charge for every hour they work. Quoting, emails, invoicing, bookkeeping, learning, marketing, photography and listing products all take time but rarely appear on an invoice. If you assume 100% billable time, the rate looks lower than it should and the shortfall appears at the end of the year. Track your time for a few weeks to find your own billable share, rather than relying on a rule of thumb. For makers who sell products rather than hours, “billable” means hours spent making items that sell; the rest is the time it takes to run the shop.
Using the rate in product prices
If you sell handmade goods, the hourly rate becomes the labour line in your price: time per item × hourly rate. A bag that takes 1.5 hours at 30 an hour carries 45 of labour before materials, packaging and overhead. Put that figure into the product pricing calculator to get wholesale and retail prices, check the result with the profit margin calculator, and see how many sales a month cover your fixed costs with the break-even calculator. Our guide on how to calculate your hourly rate as a maker or freelancer explains each input in more depth, with examples.
Converting hourly pay to a salary
The converter multiplies the hourly amount by hours per week and paid weeks per year to get a yearly figure, then divides back down. At 40 hours and 52 paid weeks, 25 an hour is 52,000 a year, 4,333.33 a month, 1,000 a week and 200 a day. Change the weeks to match your situation: if two weeks of holiday are unpaid, use 50. A month is always one twelfth of the year, because months have different numbers of working days.
Tax note and sources
For US readers: the IRS states that the self-employment tax rate is 15.3% (12.4% Social Security and 2.9% Medicare), worked out on Schedule SE, and that people in business for themselves generally need to make quarterly estimated tax payments. Income tax comes on top and depends on your situation, so the set-aside percentage is your own estimate. Other countries have different rules. Official sources, last checked 9 November 2026:
To add up start and end times for a week, including breaks and overnight shifts, use the Hours & Timesheet Calculator.
Frequently asked questions
How do I calculate my hourly rate as a freelancer?
Divide the take-home pay you want by (1 − your tax set-aside), add your yearly business expenses, then divide by the hours you can bill in a year. Example: (50,000 ÷ 0.75 + 6,000) ÷ 1,104 billable hours = 65.83 an hour.
What does billable share mean?
It is the percentage of your working hours you can charge to a client or spend making products that sell. Admin, quoting, marketing and bookkeeping are usually not billable. Track your time for a few weeks to find your own figure.
How do I convert an hourly wage to a yearly salary?
Multiply the hourly wage by hours per week and paid weeks per year. At 40 hours and 52 weeks, 25 an hour is 25 × 40 × 52 = 52,000 a year, or 4,333.33 a month.
What percentage should I set aside for tax?
It depends on your country, income and deductions, so there is no single figure. In the US, self-employment tax alone is 15.3% according to the IRS, and income tax is extra. Ask an accountant or use your tax authority's guidance to choose a percentage.
Is anything I type saved or sent?
No. The calculator runs in your browser and nothing you enter is stored or sent to our server.