How do I calculate my hourly rate as a sole trader?

Take the income you need for the year, add your annual running costs and what you'll owe in tax, then divide by the hours you can realistically bill, not the hours you work. Billable hours are often little more than half of your working hours once quoting, travel, admin and quiet weeks are removed, which is why dividing by the wrong number leaves so many traders short.

Why is my billable time so much less than my working time?

Because quoting, driving, buying materials, paperwork, chasing payments, holidays and quiet weeks are all unpaid but unavoidable. They're real hours that earn nothing directly, so the hours a customer does pay for have to carry them. Pricing as if every working hour is billable is the single most common reason a busy self-employed year still doesn't add up.

Should I charge an hourly rate or a day rate?

Use an hourly rate for small, variable jobs and a day rate for work that fills whole days. A day rate protects you when a job overruns and is often easier for a customer to accept than a running clock. They come from the same maths, so set one and convert to the other.

What costs should my rate cover besides my wages?

Everything it takes to run: the van, fuel, tools and their replacement, insurance, phone, software, an accountant, protective equipment, and the tax on your profit. List them for a year and build them into the rate on purpose. If you don't, they come out of what you assumed was your pay.

How do I raise my rate without losing customers?

Raise it on new quotes first, keep the increase modest, and let an itemised quote do the explaining so the price reads as considered rather than random. Most customers who value reliability stay; the ones who only ever chased the lowest number were rarely the work worth keeping.

How to work out your hourly rate when you're self-employed

Updated 21 July 2026

Work out your rate from the inside out, not by copying the person down the road. Decide what you need to earn in a year, divide it by the hours you can realistically bill (which is far fewer than the hours you work), then add the running costs that being self-employed quietly loads onto you. The number that falls out is your floor. Most sole traders undercharge because they skip the second step and price against a rate they overheard, so here's how to build yours from what the work actually has to pay for.

Start from what you need to earn, not what the next guy charges

The rate the person down the road quotes tells you nothing useful. You don't know their costs, their hours, whether they're busy or desperate, or whether they're quietly going under. Copying it is how a whole trade races to the bottom together.

Begin with a number you can defend: the income you need this year to pay yourself properly, cover the quiet weeks, and put something aside for tax and the future. That figure is personal and it's the only honest starting point. Everything else is arithmetic on top of it.

Count the hours you can actually bill, not the hours you work

This is the step that sinks people. A working week is not a billable week. Quoting, driving, buying materials, chasing payments, paperwork, the job that falls through, holidays, and the weeks work goes quiet all come out of your paid time before you've earned a thing.

If you work forty hours but only twenty-five of them are on a job someone pays for, then your rate has to recover a year's income across twenty-five, not forty. Traders who divide by the wrong number set a rate that looks fine and still leaves them short every month, without ever seeing why.

Be honest about billable hours: for many sole traders it's little more than half the hours they're 'at work'.
Take real weeks off out of the year before you divide, not an imaginary always-booked calendar.
Time spent quoting and chasing is overhead the billed hours have to carry, the same as fuel.

Add the costs that hide inside 'self-employed'

Your rate isn't take-home pay. Before a single unit reaches your pocket it has to cover the cost of simply running: the van and its fuel, tools and their replacement, insurance, phone, software, accountant, protective gear, and the tax you'll owe on what's left.

List those costs for a year and they're always larger than the gut estimate. Fold them into the rate deliberately, or they'll come out of the money you thought was wages, which is the slow leak that makes a busy year feel strangely broke.

Hourly or day rate: pick the one that fits the work

An hourly rate suits small, variable jobs where an hour is a fair unit and nobody's surprised by the total. A day rate suits work that eats whole days, protects you from the job that mysteriously takes 'just a bit longer', and is often easier for a customer to accept than watching a clock tick.

They're the same underlying number expressed two ways, so work out one and the other follows. A quick day-rate calculator (there's a free one at /tools/day-rate-calculator) does the conversion, but the inputs, your target income and your honest billable hours, are the part that actually matters.

Sanity-check against the market, then hold your price

Once you've built your rate from the inside, then look outward, not to copy but to check you're not wildly out of step with your area and trade. If your honest number lands far above the local going rate, the fix is usually to compete on speed, reliability and a quote that explains itself, not to slash the price until the work no longer pays.

And once it's set, hold it. The trader who quietly drops their rate to win a hesitant customer trains that customer, and the next one, to expect the lower number. A clear, itemised quote at a price you can stand behind wins more good work than a nervous discount ever does.

Common questions

How do I calculate my hourly rate as a sole trader?: Take the income you need for the year, add your annual running costs and what you'll owe in tax, then divide by the hours you can realistically bill, not the hours you work. Billable hours are often little more than half of your working hours once quoting, travel, admin and quiet weeks are removed, which is why dividing by the wrong number leaves so many traders short.
Why is my billable time so much less than my working time?: Because quoting, driving, buying materials, paperwork, chasing payments, holidays and quiet weeks are all unpaid but unavoidable. They're real hours that earn nothing directly, so the hours a customer does pay for have to carry them. Pricing as if every working hour is billable is the single most common reason a busy self-employed year still doesn't add up.
Should I charge an hourly rate or a day rate?: Use an hourly rate for small, variable jobs and a day rate for work that fills whole days. A day rate protects you when a job overruns and is often easier for a customer to accept than a running clock. They come from the same maths, so set one and convert to the other.
What costs should my rate cover besides my wages?: Everything it takes to run: the van, fuel, tools and their replacement, insurance, phone, software, an accountant, protective equipment, and the tax on your profit. List them for a year and build them into the rate on purpose. If you don't, they come out of what you assumed was your pay.
How do I raise my rate without losing customers?: Raise it on new quotes first, keep the increase modest, and let an itemised quote do the explaining so the price reads as considered rather than random. Most customers who value reliability stay; the ones who only ever chased the lowest number were rarely the work worth keeping.

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