Targeting a £40,000 income, the shortcut says: divide by roughly 220 working days, get £182/day, done. Work through the real numbers — self-employed tax, non-billable time, business costs — and the actual rate needed is £286/day. The shortcut underprices by 57%.
| Method | Day rate |
|---|---|
| Naive: £40,000 ÷ 220 days | £182 |
| Real: tax, NI, costs, actual billable days | £286 |
The 220-day assumption is the biggest single error — it assumes every working day is billable. In practice, after 6 weeks off and realistic non-billable time (admin, invoicing, gaps between contracts), a 5-day working week nets closer to 184 actually-billable days a year. Fewer billable days alone accounts for most of the gap; self-employment tax and business costs account for the rest.
Underpricing by 57% doesn't just mean a leaner year — it's the difference between a sustainable freelance business and one that quietly runs at a loss once you account for lost pension contributions, no sick pay, and no paid holiday that an equivalent employee would have folded into their salary.
Enter your target take-home, actual billable days and costs — not a guessed day count.
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