Short answer
Your minimum hourly rate is your target annual income plus your business costs and savings, divided by the hours you bill per year. To earn €50,000 with €6,000 in costs and €6,000 set aside, billing 45 weeks of 25 hours, you need at least €55.12 per hour excluding VAT.
How to calculate your hourly rate
- Decide on your target income per year, before income tax.
- Add up your business costs per year, such as software, equipment, insurance, training, travel and workspace.
- Add the amounts you want to set aside each year, such as a pension, disability insurance or a buffer for illness and quiet months.
- Work out how many hours you can bill per year: working weeks per year times billable hours per week.
- Divide the total of income, costs and savings by that number of hours.
Worked example
(€50,000 + €6,000 + €6,000) ÷ (45 × 25 hours) = €62,000 ÷ 1,125 hours = €55.12 per hour excluding VAT (rounded up to the cent). With 21% VAT, you invoice €66.70 per hour.
How many hours can you really bill?
Not every hour you work is billable. Finding clients, writing quotes, bookkeeping, invoicing, training and travel take time you usually cannot charge to a client. How much varies widely by profession and by person, so keep it in mind when you enter your billable hours per week.
Your working weeks are fewer than 52 as well. Subtract holidays, public holidays and a margin for illness and gaps between projects. If in doubt, be cautious: counting too many hours leads to a rate that is too low.
Hourly rate with or without VAT?
The calculated rate excludes VAT. In both the Netherlands and Belgium the standard VAT rate is 21%, which you add on top of your rate unless your service falls under a reduced rate or is exempt. The VAT goes to the tax authorities, so it is not part of your income.
Under a small business VAT exemption, such as the Dutch KOR or the Belgian small business scheme, you charge no VAT and cannot reclaim the VAT on your costs. Include your costs with VAT in the calculation and choose 0%.
From hourly rate to take-home pay
The income you enter is before income tax: the profit you want to keep. You still pay income tax on it, and depending on where you work, social security contributions too. In Belgium, for example, self-employed people pay social contributions through a social insurance fund. Add such contributions as a savings item if your target income should be what remains after them.
Treat the result as a floor. Below it, you do not cover your costs and income. Also compare your rate with what others charge for similar work; if the market pays more, you do not have to settle for your minimum.
Invoicing your hours
On your invoice, list the number of hours, your hourly rate excluding VAT and the VAT rate on each line. In Factuur Simpel you enter the quantity and price per invoice line, and the software calculates the VAT and totals. If you start with a quote, include your hourly rate there.
Frequently asked questions
How do I calculate my freelance hourly rate?
Add up your target annual income, business costs and savings, then divide the total by your billable hours per year (working weeks times billable hours per week). The result is your minimum hourly rate excluding VAT.
How many billable hours per week is realistic?
There is no fixed number; it depends on your profession and how you work. Subtract the time for finding clients, admin, training and travel from your working week. What remains are your billable hours.
Does the calculator show rates with or without VAT?
Both. The main result excludes VAT, and the calculator also shows the rate including the VAT rate you choose. For consumer clients, quote the price including VAT so they know what they will pay.
Why does the calculator not fill in a pension or insurance for me?
Because those amounts differ from person to person. The amounts filled in are only examples. Enter what you want to set aside each year and add lines as needed.
Invoice your hours with Factuur Simpel
Put your hourly rate on a quote or invoice and let the VAT and totals be calculated for you. Try Factuur Simpel free for 30 days, no payment details needed.
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