How do you set freelance rates?
By working backwards from the income you need, not forwards from what you used to earn per hour — because the arithmetic of freelancing is fundamentally different from employment and almost everyone gets it wrong in the same direction.
Why converting a salary is wrong. An employed salary is accompanied by employer pension contributions, paid holiday, sick pay, equipment, training, and someone else finding the work. A freelancer pays for all of that from the rate, and — crucially — cannot bill every working hour.
The arithmetic that actually works:
Start with the annual income you need, personally.
Add business costs — equipment, software, insurance, accountancy, workspace, training, professional fees.
Add pension, since nobody is contributing for you.
Add tax, calculated on profit.
Then divide by billable days, not working days. This is the step people miss. A realistic billable proportion is commonly 50–70% of working days, because the rest goes to finding work, proposals, admin, invoicing, unpaid meetings and development.
Then subtract holiday and expected sick days from the year before dividing.
The resulting day rate is frequently two to three times what an hourly conversion of the old salary suggests — and that is not greed, it is the actual cost of delivering the same work without an employer underneath it.
What else should move the rate:
Value to the client, not hours spent. The same work is worth more where it unlocks more.
Scarcity of the skill.
Risk and liability you carry.
Urgency and disruption, which justify a premium.
Length of engagement, where a long booking can justify a discount for certainty.
The practical points:
Quote a project price rather than an hourly rate where you can, since it decouples payment from speed and rewards being good.
Never quote before understanding scope, and define what is out of scope explicitly.
Charge for revisions beyond an agreed number.
Raise rates for new clients first, which is lower risk than raising them for existing ones.
Get a deposit for new clients, and stage payments on longer work.
Underpricing does not win better clients — it attracts the ones who will be hardest to work with.
General information, not financial advice.