How to Set an Hourly Rate You Can Defend

The most common pricing mistake is dividing a target salary by 2,080 hours. Nobody bills 2,080 hours. Once holiday, sickness, admin, quoting, invoicing and marketing are removed, a full-time independent typically bills between 1,000 and 1,400 hours a year.

The four inputs

1. Target take-home income for the year, before tax.
2. Business overheads: insurance, software, tools, vehicle, accountant, workspace, training.
3. Realistic billable hours: working weeks × billable hours per week. Be honest; 25 billable hours in a 40-hour week is normal.
4. A profit buffer of 10–20% for tax changes, bad debt and equipment failure.

Rate = (target income + overheads + buffer) ÷ billable hours. A £45,000 target with £9,000 of overheads and a 15% buffer, across 1,150 billable hours, gives roughly £54 an hour. If that feels high next to what you currently charge, the gap is where your unpaid overtime has been going.

Billable-hour reality check

When to stop selling hours

Hourly billing punishes you for getting faster. Once you can predict how long a type of job takes within about 20%, move to a fixed price for that job and keep the efficiency gain. Keep an hourly rate published for genuinely unpredictable work, and use it as the anchor when scope changes.

Raising the rate on existing clients

1. Give at least 30 days' notice, in writing, with the new rate and its start date.
2. Apply it to new work first; honour quoted work at the old price.
3. Do not over-explain or apologise. One sentence of reason is enough.
4. Expect to lose a client or two. If you lose none, the increase was too small.

Our hourly rate calculator runs this arithmetic for you, including the buffer and overhead split, so you can test different billable-hour assumptions before you publish a number.