How to calculate your freelance day rate (without underselling yourself)

Most freelancers pick a day rate by looking at what other people charge and rounding to a nice number. That's how you end up earning less than your employed equivalent. Here's the actual formula, and why the number you get is probably higher than you'd expect. The formula Day Rate = (Target Annual Income + Business Costs + Tax Provision) ÷ Billable Days Simple. But each variable needs thought. Step 1: Target annual income What salary would you accept as an employee? Not your dream salary — your realistic comfortable number. Include pension contributions, because nobody's matching those for you anymore. If you'd accept £50k employed, start there. Step 2: Business costs Things you now pay for yourself: Professional insurance: £300-800/year Accounting: £150-400/year Software: £500-2,000/year Home office: £500-1,500/year Phone/internet (business portion): £300-600/year Training/CPD: £200-1,000/year Marketing/website: £100-500/year Conservative estimate: £2,000-5,000/year. Step 3: Tax provi