Methodology — every formula, in the open
Mode 1 — salary → rate
tax reserve = target salary × tax % · total needed = target + expenses + benefits + tax reserve · billable hours = working hours × utilization · hourly rate = total needed ÷ billable hours. Example: $100,000 + $10,000 + $15,000 + $25,000 = $150,000 ÷ (2,080 × 70% = 1,456 h) = $103/hour.
Mode 2 — reverse
gross = rate × billable hours · implied salary = (gross − expenses − benefits) ÷ (1 + tax %). $100/hr × 1,456 h = $145,600 gross, implying a ≈$96,480 salary after $10k expenses, $15k benefits and 25% reserve.
Mode 3 — day rate
annual = day rate × billable days; hourly equivalent = day rate ÷ hours per day. £500 × 220 = £110,000/yr.
Mode 4 — IR35 (simplified, 2025/26 UK bands)
Outside IR35: director's salary £12,570 (personal allowance), employer's NI 15% above £5,000, corporation tax 19% ≤ £50k profit / 25% ≥ £250k with HMRC marginal relief (3/200)×(250,000−profit)×(profit/50,000) between, then dividend tax (8.75% / 33.75% / 39.35% with £500 allowance in the basic band). Inside IR35: umbrella margin and expenses deducted, employer's NI 15% above £5,000 deducted from the rate, then income tax (20/40/45%) and employee NI (8%/2%) on the deemed pay. Example: £500/day × 220 days → ≈£70,000 take-home outside vs ≈£62,000 inside. (Some older guides quote ~£85k/£68k — those use pre-2021 rules; the figures here follow current 2025/26 bands and are shown step by step.)
Mode 5 — contract vs permanent
permanent total = salary × (1 + pension %) + bonus · premium = contract annual − permanent total · break-even day rate = permanent total ÷ billable days. £500/day vs £80k + 5% pension: raw gap £30,000, benefits-adjusted premium £26,000, break-even ≈£382/day.
Mode 6 — tax presets (approximations)
US 1099 (2025, single): self-employment tax 15.3% on 92.35% of profit (Social Security 12.4% capped at the $176,100 wage base, Medicare 2.9% uncapped) + federal income tax on (profit − half SE tax − $15,000 standard deduction) at 2025 single brackets. Excludes state tax. UK sole trader (2025/26): income tax 20/40/45% on bands £12,570/£50,270/£125,140 + Class 4 NI 6%/2% + Class 2 £3.50/week. Germany (2025 Grundtarif, single): the official zone formula + 5.5% solidarity surcharge only when income tax exceeds €19,950; excludes trade tax, church tax and health insurance. India (new regime FY 2025-26): slabs nil–30% on total income with 87A rebate to ₹12L + 4% cess; no deductions; excludes surcharge above ₹50L.
Scope boundaries (what this tool is not)
vs wage-to-salary calculator: that tool converts pay between periods (hourly ↔ annual ↔ monthly) with no business logic. This lab prices work: overhead, benefits, tax reserves, utilization, day rates and IR35. Different intent — they cross-link, not overlap. vs self-employed tax calculator: that is a dedicated US 1099 tax engine; this lab's mode 6 is a quick multi-country preset that feeds the rate math. Not advice: all figures are educational estimates. Tax rules change and personal circumstances vary — consult a qualified tax professional before relying on any figure.
Frequently asked questions
What hourly rate should I charge as a freelancer?
Add up what the business must earn in a year: the salary you want to take home, plus business expenses (software, equipment, insurance), plus the benefits you now fund yourself (health cover, retirement), plus a tax reserve. Divide that total by your billable hours — not total working hours. Billable hours are your working hours multiplied by your utilization rate (typically 60–75%). Mode 1 above does exactly this math and shows every line of the working.
How do you calculate a freelance hourly rate from a salary?
Start from the salary you want to replace — say $100,000 — then add annual business expenses ($10,000), self-funded benefits ($15,000), and a tax reserve (25% of the target salary = $25,000), giving $150,000 the business must bill. With 2,080 working hours a year at 70% utilization you can bill 1,456 hours, so the rate is $150,000 ÷ 1,456 ≈ $103/hour. Use mode 1 with your own numbers; mode 2 runs the same math in reverse.
What is a utilization rate, and why do calculators use 60–75%?
Utilization is the share of your working hours you can actually bill to clients. The rest goes to pitching, admin, invoicing, learning, and gaps between projects. Surveys of independent professionals consistently land around 60–75% billable, which is why this calculator defaults to 70% and highlights that band on the slider. If you are just starting out or do heavy business development, use 50–60%; if you are fully booked with retainers, 75–85% is realistic.
How do I calculate a freelance day rate?
A day rate is your hourly rate times the hours in your working day — but contractors usually price the day directly. Multiply your day rate by your billable days per year (220 is the UK contracting standard: 260 weekdays minus holidays and gaps) to get the annual equivalent. Mode 3 does this: £500/day × 220 days = £110,000 a year, or about £66.67/hour on a 7.5-hour day. UK and Australian contractors: compare this with the IR35 mode before quoting.
How do I convert a contractor day rate to an annual salary?
Multiply the day rate by billable days per year — £500 × 220 = £110,000 gross revenue. That is revenue, not salary: a permanent employee's £80,000 salary comes with paid leave, employer pension contributions, and no gaps between contracts. Mode 5 compares the two properly by adding pension and bonus value to the permanent side, and mode 4 shows the take-home after UK tax for inside- versus outside-IR35 contracts.
What does inside IR35 vs outside IR35 mean for my take-home pay?
IR35 is UK tax law for contractors. Outside IR35, you typically work through your own limited company: you pay corporation tax on profits (19–25% with marginal relief) and dividend tax on what you draw, keeping more of the headline rate. Inside IR35, you are taxed like an employee (income tax + National Insurance via PAYE, with employer's NI effectively deducted from your rate), so take-home is lower. Mode 4 models both: at £500/day over 220 days the simplified model gives about £70,000 take-home outside versus £62,000 inside. This is a simplified illustration — IR35 status depends on working practices, so consult an accountant for a real determination.
Is £500 per day a good contract rate?
It depends what it replaces. £500/day × 220 billable days = £110,000 annual revenue — £30,000 more than an £80,000 permanent salary on headline numbers. But the permanent role typically adds ~5% employer pension (£4,000), paid leave worth ~£7,700, and income between contracts. Mode 5 adjusts for benefits: against an £80,000 salary with 5% pension, the contract's real premium is about £26,000, and any day rate above ~£382/day beats the permanent package. Run your own numbers — the break-even day rate is the figure that matters.
Should I take the contract or the permanent job?
Compare total value, not headlines. Add to the permanent salary: employer pension contributions, bonus, and the cash value of paid leave. Compare that with the contract's annualised day rate minus the cost of unpaid gaps, your own insurance, and admin time. As a rule of thumb, contractors target a 25–40% premium over the equivalent salary to cover risk and missing benefits. Mode 5 computes the premium and the break-even day rate so you can see exactly where the contract stops being worth it.
How much tax should a freelancer set aside from each payment?
A common rule is 25–30% of profit in the US (self-employment tax alone is 15.3%) and 20–30% in the UK, but the right number depends on your profit and jurisdiction. Mode 6 estimates it from real headline rules: for example, $100,000 of US 1099 profit faces about $26,189 in federal + self-employment tax (26.2%), while £60,000 of UK sole-trader profit faces about £14,071 (23.5%). Use the suggested reserve percentage as your mode 1 tax-reserve input — then adjust with an accountant.
Is there a freelance rate calculator for India (INR)?
Yes — switch the currency to INR and use mode 6's India preset, which applies the new-regime FY 2025-26 slabs (nil to ₹4L, 5–30% above, 87A rebate to ₹12L, +4% cess). For instance, ₹20,00,000 of freelance profit faces about ₹2,08,000 in tax (10.4%), so a 12–15% reserve is a reasonable starting point for mode 1. Indian freelancers should also check GST registration thresholds and 44ADA presumptive taxation with a CA — this tool does not model those.
Can I use this in Germany, Australia, Canada or Ireland?
The rate math (modes 1–3 and 5) works anywhere — only the currency symbol changes, since no exchange rates are used. Mode 6 includes a Germany preset using the 2025 Einkommensteuer formula for single filers (about 24% effective on €60,000 profit, before trade tax and health insurance). For Australia, Canada, Ireland and Belgium there is no built-in tax table yet: set the mode 1 tax-reserve slider manually from your accountant's guidance or last year's effective rate.
What should a freelance graphic designer charge per hour?
There is no single right number — it depends on your costs and market — but the method is the same for designers, writers, developers and photographers. As a starting point, mode 1's profession presets fill a typical target salary (e.g. $65,000 for a graphic designer); with $8,000 of expenses, $10,000 of self-funded benefits and a 25% tax reserve at 70% utilization, that implies roughly $69/hour. Adjust the target to your experience and local market, and sanity-check against the rate ladder (±20%) the calculator shows.
How is this different from a wage-to-salary calculator?
They answer different questions. A
wage-to-salary calculator converts pay between periods — hourly to annual, monthly to weekly — with no business logic. This lab
prices your work: it adds overhead, self-funded benefits and tax reserves, applies utilization to find billable hours, and handles day rates, IR35 contractor tax and contract-vs-permanent comparisons. Use the wage converter when you need a quick period conversion; use this lab when you need to set or justify a rate.
How is this different from a self-employed tax calculator?
The
self-employed tax calculator is a dedicated 1099 tax engine — it goes deep on US self-employment tax. This lab's mode 6 covers similar ground only as a quick preset (US, UK, Germany, India) whose result feeds straight into the rate math as your tax-reserve percentage. For detailed US tax planning, use the dedicated tool; for setting your rate, stay here.
How accurate are the international tax presets?
They are careful approximations of published headline rules — 2025 US federal brackets and the $176,100 Social Security wage base, 2025/26 UK bands and National Insurance, the 2025 German income-tax formula, and India's FY 2025-26 new-regime slabs — verified against hand calculations. They deliberately exclude things like US state tax, German trade tax and church tax, and UK pension deductions, because those vary per person. Treat every figure as an estimate for rate-setting, not a filing: your actual liability depends on deductions and circumstances.
Is this financial or tax advice?
No. Everything here is an educational estimate to help you set rates — not financial, tax or legal advice. Tax figures are approximations of headline rules and your real liability depends on deductions, reliefs and personal circumstances. For IR35 status determinations, contract reviews and tax filings, consult a qualified accountant or tax professional in your jurisdiction.