Most freelancers set their rate by looking at what other people charge, picking a number that feels safe, and hoping it works out. Then December arrives and the numbers don't add up.
There's a better way. Instead of starting with the market, start with the income you want and work backwards to the minimum rate that gets you there. It takes about 30 minutes, and you'll go into 2027 knowing exactly what to charge and why.
The freelance rate formula
Minimum hourly rate = (what you want to pay yourself + business expenses) ÷ billable hours in the year
That's it. The hard part isn't the maths. It's being honest about each number. Let's go through them one at a time.
Step 1: Decide what you want to pay yourself in 2027
Start with your personal number: the amount you want to earn from your business before income tax. Think about your living costs, savings goals and anything you want to do in 2027 that costs money.
If you were employed before, your old salary is a useful reference, but remember that as a freelancer you also pay for things an employer used to cover, such as paid holidays, sick days, equipment and, in many countries, a larger share of social contributions.
Example: Sam, a freelance designer, wants to pay herself $52,000 in 2027.
Step 2: Add your business expenses
List everything the business pays for in a year: software and subscriptions, equipment, website and hosting, insurance, accountant, training, marketplace or payment fees, ads, contractors and a co-working space if you use one.
Your 2026 bank statements are the fastest source. Add a little for anything you know will go up next year.
Example: Sam's expenses come to $8,000. So her 2027 revenue goal is $60,000 ($52,000 + $8,000).
Step 3: Count your real billable hours
This is where most freelance rates go wrong. You won't bill 40 hours a week for 52 weeks. You need time for holidays, sick days, admin, invoicing, sales calls, marketing and learning.
- Working weeks: start with 52 and subtract holidays, public holidays, sick days and slow weeks. Many freelancers land somewhere around 44 to 48.
- Billable hours per week: only count hours you can actually charge for. If you're not sure, track one normal week. For many solo freelancers it's 20 to 30 hours.
Example: Sam plans 46 working weeks at 25 billable hours a week. That's 1,150 billable hours in 2027.
Step 4: Calculate your minimum hourly rate
Divide your revenue goal by your billable hours.
Example: $60,000 ÷ 1,150 hours = $52.17 per hour.
This is your floor, not your price. Below this number you're working for less than the income you decided you need. Write it down somewhere you'll see it every time you send a quote.
Step 5: Add a buffer
The floor assumes every week goes to plan. It won't. Clients pay late, projects run over and some months are quiet. A buffer of 10 to 20% protects you from all of that.
Example: $52.17 + 15% ≈ $60. Sam sets her 2027 standard rate at $60 per hour.
Step 6: Check it against the market and your value
Now look outward. Compare your rate with freelancers who have similar skills, experience and clients in your field. Three questions help:
- Is my rate well below the market? Then you have room to charge more, especially for clients who already trust you.
- Is it well above? Then make your value obvious: a specialism, faster turnaround, proven results or a niche you know well.
- Which work pays best per hour? Divide what each client paid you in 2026 by the hours you spent on them. This effective hourly rate often shows that your favourite client is quietly your least profitable. It's one of the steps in our 7-step year-end review for small businesses.
Turning your hourly rate into project prices
Many clients prefer a fixed price. To quote one, estimate the hours, multiply by your rate, then add a buffer for revisions and communication.
Example: a 20-hour branding project × $60 = $1,200. Add 15% for revisions and calls, and Sam quotes $1,380.
You can also work out how many projects you need. If Sam's average project is worth $1,500, she needs 40 projects in 2027 ($60,000 ÷ $1,500), or about 3 to 4 a month. If that feels like too many, it's a sign to raise prices or create a higher-value offer.
How to raise your rates with existing clients
If your new rate is higher than what current clients pay, give them notice. Thirty to sixty days is a common, respectful window, and January is a natural time for a change. Keep the message short and confident:
Hi [Name], I've really enjoyed working with you this year. From [date], my rate for new work will be [new rate]. Anything already booked before then stays at the current rate. Thank you for your continued trust, and I'm looking forward to [next project] in 2027.
You don't need to apologise or justify every cost. Most good clients expect prices to change over time.
Review your rate in July
A rate isn't set once and forgotten. Check in at mid-year: are you on track for your revenue goal? Are you working more hours than planned? If the numbers have drifted, adjust your rate, your offers or your workload for the second half of the year. And at the end of the year, run a full year-end review before you set next year's rate.
Frequently asked questions
Should I charge hourly or per project?
Use your hourly rate as your internal measuring stick either way. Project pricing usually works better once you can estimate the work reliably, because you're paid for the result, not the time.
What if a client says my new rate is too high?
Offer a smaller scope at the same rate instead of a discount. If the work still doesn't fit their budget, that client may not be the right fit for your 2027 goals, and that's useful to know.
Do I need to include tax in my rate?
Income tax is usually paid out of what you pay yourself, so set money aside from every payment according to the rules in your country. Sales tax or VAT, where it applies, is normally added on top of your price. Check with a local accountant: this article is general guidance, not financial or tax advice.
Do the whole calculation in one afternoon
If you'd rather fill in the numbers than work them out on a scrap of paper, the Year-End Review + 2027 Business Planner walks you through it. The Income goal & pricing check page uses the same formula as this article, the Client & offer review shows your effective hourly rate for every client, and the bonus 2027 Income Goal Calculator for Excel and Google Sheets does the maths for you.