How Much Should I Charge? The Only Freelance Pricing Formula That Actually Works

April 2026 · 9 min read · By Zankex

The most common freelance pricing strategy is this: look at what other people charge, pick a number in the middle, and hope it works out. It usually doesn't — because it ignores the four costs that make most freelancers' rates completely unviable before a single invoice is sent.

Tax. Business expenses. Non-billable time. Dry spells. Miss any one of these and your "hourly rate" is a fiction — a number that sounds reasonable but leaves you earning less than you need.

This article gives you the formula that accounts for all of them. It's not complicated, but it almost certainly produces a higher number than you're currently charging.

Why "income goal ÷ hours" always gets it wrong

Most people start with a simple calculation: if I want to earn £40,000 and work 40 hours a week, I need to charge £20/hour. Here's why that's wrong on every level.

It ignores tax. As a freelancer, your £40,000 target is what you want to keep after tax. But you'll pay income tax and National Insurance on your profits. Depending on your situation, you might need to earn £55,000-60,000 to take home £40,000. The rate you charge needs to cover this.

It ignores business costs. Software subscriptions, professional insurance, equipment, training, accounting fees, home office costs — these reduce your take-home pay. They need to be built into your rate.

It ignores non-billable time. You don't spend 40 hours a week doing billable client work. You spend time on business development, admin, invoicing, marketing, professional development, and managing projects. Realistically, 30-50% of your working hours aren't billable. Your rate needs to cover your living costs across all your hours, not just the ones clients pay for.

It ignores dry spells. You won't be fully booked 52 weeks a year. There will be quiet periods, gaps between projects, time spent pitching, and weeks you're ill or on holiday. A sensible rate includes a buffer for these — typically 10-20% on top of your base requirement.

The formula that actually works

Let's walk through a real example. A freelance designer wants to take home £40,000/year. They have £3,000/year in business expenses, pay around 25% in tax, want a 15% dry-spell buffer, work 46 weeks a year, have 5 billable hours per day, and spend 30% of their time on non-billable work.

The three-tier pricing strategy

Once you have your minimum viable rate, the next step is to build a three-tier pricing structure. This isn't about charging clients different amounts for the same work — it's about having a range that reflects real differences in scope, complexity, and urgency.

Economy tier (your minimum rate): Entry-level projects with clear scope, simple deliverables, and flexible timelines. Price-sensitive clients or portfolio-building work. You should never go below this rate — it's the floor below which you're losing money.

Standard tier (+30-40% above minimum): Your default rate for typical client work. Full service, standard timeline, normal complexity. This is the rate you quote first in most conversations.

Premium tier (+70-80% above minimum): Rush jobs, highly complex briefs, specialist expertise, or clients who need priority access to your time. Justified by the value you deliver, not just your hours.

Research consistently shows that presenting three options shifts clients away from price-only decision-making. When someone sees one price, they decide yes or no. When they see three, they decide which one — and they tend toward the middle.

How to raise your prices without losing clients

Most freelancers who discover their rate is too low face the same fear: if I raise my prices, clients will leave. This fear is usually overstated, but it's worth understanding the psychology.

The clients most likely to leave when you raise prices are the clients you can least afford to keep — the ones who push back hardest on cost, request the most revisions, and generate the most stress. Losing them creates space for clients who value quality over price.

In practice, most established freelancers find that 70-80% of existing clients accept a reasonable rate increase with minimal friction — especially when given proper notice and a clear explanation that links the increase to your growing expertise or market rates.

The key is how you communicate it. A confident, brief email that states the new rate, gives the client adequate notice, and doesn't over-apologise performs significantly better than a long, defensive explanation. The Price Positioning Report includes three email templates tuned for different client relationships — from long-term retainers to newer clients.