How to price your freelance work (and stop undercharging)

The undercharging epidemic

Ask any freelancer what they'd change about their first year and most will say the same thing: "I'd charge more." It's almost universal. When you're new, you feel like you should be grateful for any work. You price low to be "competitive." You say yes to projects that don't cover your costs.

Then one day you do the maths and realise you're earning less than minimum wage when you account for all your hours. Sound familiar?

Let's fix that.

How to calculate your minimum rate

Before you set prices, you need to know your floor — the absolute minimum you can charge and still make this work. Here's the formula:

Step 1: Work out your annual costs

• Business expenses (software, equipment, insurance): ~£2,000-5,000
• Tax and NI (roughly 25-30% of your earnings)
• Pension contributions (if you're sensible)
• Personal living costs (rent, bills, food, life)

Step 2: Count your billable days

There are roughly 260 working days in a year. But you won't bill all of them:

• Subtract 25 days for holiday
• Subtract 10 days for being ill or personal admin
• Subtract 40-60 days for non-billable work (marketing, admin, chasing invoices)

That leaves about 165-185 billable days. Most freelancers are surprised by how low this number is.

Step 3: Do the maths

If you need to earn £40,000 after tax, and you add 30% for tax, you need to invoice about £52,000. Divide by 175 billable days: £297/day.

That's your floor. Anything below that and you're subsidising your clients' businesses with your unpaid time.

The four pricing models

Hourly rate

You charge for time spent. Simple to understand, but it punishes efficiency — the faster you work, the less you earn. Best for: ongoing retainer work where scope is unpredictable.

Day rate

Like hourly but chunkier. Common in consulting, development, and design. A day rate feels more professional and avoids nickel-and-diming over 15-minute increments. Best for: client-site work or clearly defined sprints.

Project rate (fixed fee)

You quote a total price for the project regardless of how long it takes. This rewards your expertise — if you can do in 3 days what someone else takes 10 days to do, you earn more per hour. Best for: well-defined projects with clear deliverables.

Value-based pricing

You price based on the value you create for the client, not the time it takes you. If your landing page redesign will generate £50,000 in extra revenue, charging £5,000 is a bargain for them. Best for: experienced freelancers who can quantify their impact.

How to raise your rates

Here's a truth most freelancers avoid: your rates should go up every 6-12 months. Your skills improve, your experience grows, and inflation is a thing.

For existing clients, give 30 days notice:

"Hi [name] — I'm updating my rates from [date]. My day rate will be moving from £X to £Y. This reflects the experience I've built and the value I bring. I'd love to keep working together and I'm happy to chat if you have any questions."

Most clients accept. The ones who don't were probably undervaluing you anyway.

Three signs you're undercharging

• Clients never push back on your price. If everyone says yes immediately, your rate is too low.
• You're booked solid with no breathing room. High demand + no free time = your prices should go up.
• You resent the work. Resentment often comes from feeling underpaid, not from the work itself.

The bottom line

Pricing isn't about what you think you're worth. It's about what the market will pay for the problem you solve. Do the maths, know your floor, and charge accordingly. You can always adjust.

But you can't get back the money you left on the table.