Calculate an hourly rate from realistic billable hours

Written by the Offertje editorial team. Examples are illustrations, not market-rate research. Reviewed 5 November 2026.

Your working week and your billable week are different things. Writing quotes, travelling, buying materials, answering enquiries and keeping records all take time. If your hourly rate assumes every working hour can be invoiced, the plan can fail even when your diary looks full.

Start with an annual revenue requirement

Write down the amount the business needs to generate before VAT. For an illustration, take £36,000 of owner compensation before personal tax, £9,000 of operating costs and a £3,000 reserve. The total is £48,000. These are invented planning figures, not a suggested salary or a typical business cost.

Put each cost in once. Insurance, software, equipment replacement and administrative support may belong in overheads. Materials that are separately priced in each job should not also be fully included in annual overheads. Your own pay target is not the same as take-home pay: personal taxes and contributions still depend on your circumstances.

Divide by hours you can actually invoice

Suppose you expect to bill 30 hours a week for 40 weeks. That is 1,200 billable hours a year. Your planning rate is £48,000 ÷ 1,200 = £40 per billable hour. The other weeks and hours need to cover holidays, illness, gaps between projects and business administration.

Now test a quieter year. At 1,000 billable hours, the same requirement needs £48 an hour. At £40 an hour, those 1,000 hours produce £40,000, leaving an £8,000 shortfall against the plan. A small change in billable capacity can matter more than trimming a minor subscription.

Use the rate when pricing a fixed job

A six-hour task at the £40 planning rate contributes £240 before separately priced materials and any applicable tax. Include preparation, communication and handover in the six hours if they belong to that job. If they are already allowed for in your annual capacity calculation, avoid adding the same allowance again without a reason.

The result is a planning floor under your chosen assumptions, not a claim that customers will accept that price. Specialist skill, urgency, alternatives and the value of the outcome may justify a different commercial price. Compare the proposed fee with the scope rather than copying an unsupported “average freelancer rate”.

Check the plan against real work

Record planned and actual hours for completed jobs. Review the rate when costs or realistic billable hours change. Use the hourly rate calculator for scenarios, then bring the agreed quantity and price into your quote. Keep revenue, tax collected and take-home income separate.