How to set a freelance day rate from the salary you want

Most people set the rate first and hope the year works out

The usual way to pick a day rate is to think of a number that sounds about right, charge it, and find out in twelve months whether it was enough. It usually was not, because the number was never connected to anything you actually needed to earn.

The better way is to start from the take-home you want for the year and work back to the rate.

Start from annual take-home, not a daily number

Decide what you want to end the year with in your account, after tax. That is the one figure that has to survive. Everything else in this calculation exists to protect it.

Add back tax and National Insurance

You do not need to bill for your target take-home. You need to earn enough that your target take-home is what is left once tax and National Insurance come out. Work out that gross figure from your own position, with an accountant or your tax authority's guidance, because the rate depends on your total income and allowances. Whatever it is, that gross number, not the take-home, is what the rest of the sum works from.

Add your real business costs

Software, insurance, equipment, an accountant, a share of your workspace, the time you spend finding the next contract. These come out before any of the money is yours, so they belong in the target.

Divide by the days you can honestly bill

This is the step most people skip, and it is where a reasonable-sounding rate quietly falls short. A year has roughly 260 working days. You will not bill anywhere near all of them once you take out holiday, sick days, admin, quoting, marketing and the gaps between contracts. For most freelancers the real number is somewhere between 150 and 200 billable days. Divide by 260 and you have built a rate that only works in a year that does not exist.

The number this produces

Gross target, plus costs, divided by your honest billable days. That is the day rate you need to charge to hit the take-home you started with. Anything below it means working harder to end up short.

Doing it without the arithmetic

The Day-Rate Calculator runs exactly this: your target take-home, your tax rate, your costs and your billable days in, the day, half-day and hourly rate out. Its Projects tab then checks whether the jobs you actually quoted paid that rate or quietly did not. It is included, with every other SteadyKeel tool, in the SteadyKeel Pass.