Pricing is one of the hardest parts of starting as a freelancer. Charge too little and you burn out while barely covering your bills. Charge too much with no proof of value and you may struggle to land your first client. The goal is a rate that is fair to your clients and sustainable for you.
This guide gives you a simple formula, a worked example, and practical tips to set your first rates with confidence.
This article is educational and is not personal financial or tax advice. The numbers below are hypothetical examples, not benchmarks for your field.
Why New Freelancers Often Underprice
Many beginners set their rate by comparing it to an old job’s hourly wage. That’s a trap, because an employee’s hourly wage doesn’t include:
- Self-employment tax and income tax, which aren’t withheld
- Health insurance and retirement savings that employers often help pay for
- Paid time off and holidays
- Business expenses like software, equipment, and marketing
- Unbillable time spent on emails, proposals, invoicing, and finding clients
A freelancer who charges the same as an employee’s wage will usually take home much less.
The Three Main Pricing Models
| Model | How it works | Best for | Watch out for |
|---|---|---|---|
| Hourly | You charge for each hour worked | Unclear scope, ongoing support | Faster work can mean lower pay |
| Per project | One fixed price for a defined deliverable | Clear scope and deadline | Scope creep if limits aren’t set |
| Retainer | A fixed monthly fee for ongoing work | Long-term clients | Define exactly what’s included |
Many new freelancers start hourly to learn how long tasks take, then move to project pricing once they can estimate accurately.
A Simple Formula to Set Your Hourly Rate
Step 1: Choose your target take-home income. How much do you want to keep each year after taxes and business costs?
Step 2: Add your annual business expenses. Software, equipment, insurance, and marketing.
Step 3: Add a tax set-aside. Estimate the share of your earnings you’ll need to reserve for taxes. The exact percentage depends on your income, location, and deductions.
Step 4: Estimate your billable hours. This is far lower than a 40-hour week, because unbillable tasks take time.
Step 5: Divide.
Required gross income = (Take-home goal + expenses) ÷ (1 − tax set-aside rate)
Hourly rate = Required gross income ÷ billable hours
Worked Example (Hypothetical)
- Take-home goal: $40,000
- Business expenses: $4,000
- Tax set-aside: 25% (a simplified assumption)
- Billable time: 25 hours per week × 48 weeks = 1,200 hours (leaving 4 weeks for vacation, holidays, and sick days)
Required gross income = ($40,000 + $4,000) ÷ 0.75 = about $58,667
Hourly rate = $58,667 ÷ 1,200 = about $49 per hour
If you’re doing this as a side hustle with fewer hours, you can adjust the billable hours, but the logic stays the same. Use your own numbers, and remember that your real tax rate may be higher or lower. For details on the self-employment portion, read Self-Employment Tax Explained.
Don’t Forget Retirement and Health Costs
When you work for yourself, you pay for your own benefits. Build them into your rate:
- Health insurance premiums
- Retirement contributions. See how much freelancers should save for retirement for a starting point.
- A buffer for slow months
Check the Market Before You Finalize
Your formula tells you what you need. The market tells you what you can charge. Compare the two:
- Research rates in your niche. Look at public portfolios, freelance job posts, and industry surveys.
- Consider your experience level. A newcomer with no portfolio may charge less than the formula suggests at first, but shouldn’t go far below it.
- Consider your niche. Specialized skills usually command higher rates than general ones.
- Consider the client. Established businesses often have bigger budgets than individuals.
If the market rate is lower than your formula, you can reduce expenses, improve your skills, target higher-paying clients, or increase your billable hours.
How to Price a Fixed-Price Project
When you quote a project instead of an hourly rate:
- Estimate how many hours the work will take.
- Multiply by your hourly rate.
- Add a buffer of around 15% to 25% for revisions and surprises.
- Define the scope, number of revisions, and deadlines in writing.
Example: 10 hours × $49 = $490. Adding a 20% buffer gives about $588, which you might round to $590 or $600.
If You Use a Platform, Include Its Fees
Freelance marketplaces take a share of your earnings, so price with that in mind. We compare the fees and trade-offs in Upwork vs. Fiverr: Which Pays Freelancers Better?
Common Pricing Mistakes to Avoid
- Charging a hobby rate for professional work
- Not accounting for unpaid time, like emails and revisions
- Giving unlimited revisions without limits in the contract
- Never raising your rates as your skills grow
- Discounting too fast whenever a client pushes back
- Ignoring taxes when calculating take-home pay
When and How to Raise Your Rates
Plan a rate review at least once a year, or sooner when:
- You’re booked solid
- You have new skills, certifications, or results to show
- Clients accept your quotes without negotiating
A common approach is to raise rates for new clients first, then give existing clients advance notice before applying the increase.
Tools That Help
Track your time and income so you can see your real hourly rate, and send professional invoices from the start. Our guide to the best invoicing software for freelancers covers options for every budget.
Frequently Asked Questions
How much should a beginner freelancer charge per hour?
There’s no single answer. It depends on your field, location, skills, and costs. Use the formula above to find your minimum, then compare it with market rates in your niche.
Should I charge hourly or per project?
Hourly is simpler when you’re starting out and learning how long work takes. Project pricing can pay better once you can estimate accurately.
Is it okay to offer a discount for my first clients?
A small, clearly labeled introductory discount can help you earn your first testimonials. Avoid going so low that you can’t sustain the work, and state when the regular rate begins.
Do I need to include taxes in my rate?
Yes. Because taxes aren’t withheld, your rate should leave enough after expenses to cover them.
Disclaimer: This content is for general information only and does not constitute personalized tax, legal, or financial advice. Examples are hypothetical and not guarantees of income. Consult a qualified professional before making financial decisions.
Last Update: October 5, 2026