Freelance Income Calculator
$99,999.36 a year
What you actually keep at $115.74 an hour, after costs and tax.
- Revenue you invoice
- $166,665.60
- After 20% business costs
- $133,332.48
- After 25% tax
- $99,999.36
- Billable hours a year
- 1,440
How this is calculated
This is the question the hourly rate calculator answers backwards. There you start from the income you want and find the rate; here you start from the rate you already charge and find out what it actually leaves you. The order of operations is what makes the answer surprising. Your rate multiplied by your billable hours is revenue, not income, and two things come out of it before anything reaches you. Business costs come first, because software, hardware, insurance and an accountant are paid out of revenue whether or not you had a good year. Tax comes second, on what is left. Applying both in that order to a rate that looked generous is how a headline number like a hundred and sixteen dollars an hour turns into something much closer to an ordinary salary. The figure worth watching is not the hourly rate at all, it is the bottom line, and the fastest way to move it is usually billing more of the hours you already work rather than charging more for them.
Worked example
Thirty billable hours across forty-eight weeks is 1,440 hours a year, which at $115.74 invoices $166,665.60. Twenty percent of that goes on running the business, leaving $133,332.48. A quarter of what remains goes to tax, leaving $99,999.36. That is sixty percent of the revenue, and it is the only number that pays your rent.
Inputs: $115.74 an hour, 30 billable hours a week, 48 working weeks, 20% business costs, 25% tax
Result: $99,999.36 take-home from $166,665.60 of revenue
What this assumes
- Every billable hour you enter is actually billed and actually paid. Unpaid invoices are not modelled here.
- Business costs and tax are flat percentages of revenue. Real tax is banded and this is an estimate, not a tax return.
- Costs come out before tax, which is the usual order for a self-employed business but not universal. Check with your accountant.
Questions
- Why is my take-home so much lower than my rate suggests?
- Because an hourly rate is a price, not a wage. Between the two sit the hours you work but cannot bill, the costs of running a business nobody else is paying for, and tax that an employer would previously have handled. Sixty cents on the dollar is a normal outcome, not a sign you are doing something wrong.
- Is it better to raise my rate or bill more hours?
- Raising the rate is usually easier and always more efficient, because it costs you no extra time. But it is capped by what your market will pay. Billing more of the hours you already work has no ceiling until you run out of week, which is why the billable hours calculator is worth a look before you raise prices.
- Should I use 52 weeks?
- Only if you plan to work every week of the year including when you are ill. Forty-six to forty-eight weeks is realistic for most freelancers once holiday and sickness are subtracted, and using 52 quietly overstates your income by roughly a tenth.