Start from the money you want to keep, not the money you want to bill. This works backwards through tax, time off and costs to the rate you actually need.
Divide the income you need before tax by the days you can actually bill, not by 260. Most freelancers bill between 130 and 180 days a year once holiday, sickness, admin, marketing and gaps between contracts are taken out. Using 260 is the single most common reason a rate that looked fine leaves you short.
A useful sanity check: a £400 day rate at 150 billable days is £60,000 of turnover, which after costs and tax lands nearer £42,000 take-home, roughly the same as a £55,000 salaried job once you account for employer pension contributions and paid leave.
Work backwards from take-home pay.
Here is exactly what the tool does with your numbers.
The salary equivalent solves the same problem in reverse for an employee, using income tax and Class 1 employee National Insurance. It deliberately excludes employer pension contributions, paid holiday, sick pay and redundancy rights, all of which a freelancer funds themselves, so a like-for-like freelance rate should sit meaningfully above it.
Calculations assume you trade as a sole trader. If you work through a limited company the tax profile changes; use the sole trader vs limited company calculator to compare.
Between 130 and 180 for most people. There are around 260 working days in a year, but holiday, sickness, admin, invoicing, marketing, proposals, training and gaps between contracts all come out of that. Billing four days a week for 46 weeks gives 184 days, and that is towards the optimistic end.
Dividing your target income by 260 is the most common costing mistake freelancers make, and it produces a rate roughly 40% too low.
A rough rule is to divide the salary by 100 to get a starting day rate, so a £50,000 salary suggests about £500 a day. That builds in an allowance for unpaid time off, self-funded pension, business costs and the risk of gaps between contracts.
It is only a starting point. The calculator does the arithmetic properly by working backwards from the take-home pay you want through actual tax rates and your real billable days.
Quote your rate excluding VAT and state that clearly. If you are VAT registered you add VAT on top when you invoice. Most business clients reclaim it, so it does not affect what they really pay, but it does affect your cash flow and it must never be quoted ambiguously.
If your customers are consumers or VAT-exempt businesses, VAT is a genuine 20% price rise to them, so plan for it before you cross the registration threshold.
No. This calculator assumes you are genuinely self-employed and trading on your own account. If a contract is caught by the off-payroll working rules, your income is taxed broadly like employment income and your effective take-home falls significantly.
Status is a legal question that depends on the working arrangement, not on what the contract is called. Take proper advice on any contract you are unsure about.
Built by Veris Labs
These calculators are a small, public version of what we do. The Veris Labs suite covers marketing and delivery, and where nothing off the shelf fits, we build it around your business instead.
