Guide

How to work out your true hourly rate

Last reviewed 12 September 2026

There are 2,080 working hours in a full-time year. You will charge for around 1,200 of them. That gap is the whole reason self-employed rates look high and take-home pay does not.

Ask a sole trader what their hourly rate is and most can answer instantly. Ask how they arrived at it and the answer is usually that it is what the last firm charged, or what the man down the road charges. Neither of those is a calculation, and neither of them knows your costs.

Step one: count the hours you can actually sell

Start at 52 weeks. Take off four weeks of holiday, two weeks for public holidays and the quiet fortnight around Christmas, and a realistic week for illness and family. That leaves about 45 working weeks.

Now take off the part of each week that is not chargeable. Quoting and site visits, invoicing and chasing, ordering and collecting materials, van maintenance, certification and paperwork, training. For most trades that is between one and one and a half days a week. At one day a week you are left with four chargeable days, and on a genuinely full day you will bill about seven and a half hours, not eight.

45 weeks times 4 days times 7.5 hours equals 1,350 chargeable hours. If your diary is not full all year, and almost nobody's is, 1,150 to 1,250 is the honest planning figure.

Step two: total the cost of being in business

These are the costs that arrive whether or not you worked this week. Add up your own real figures for a year:

A typical single-van trade lands somewhere between 9,000 and 16,000 pounds a year. Use your own numbers, not that range.

Step three: decide what you want to earn

Write down the amount you need to take out of the business in a year to live on. Then remember what that figure has to survive: income tax, National Insurance, and the pension that no employer is paying into for you. If you want 35,000 pounds in your hand, the business has to make meaningfully more than 35,000 pounds.

Step four: do the sum

Rate equals the sum of your target earnings and your annual overheads, divided by your chargeable hours.

Take 42,000 pounds of target earnings before tax, 12,500 pounds of overheads, and 1,200 chargeable hours. That is 54,500 divided by 1,200, which is 45.42 pounds an hour. Round to 46 pounds. And that rate contains no profit at all yet: it pays you and it pays your costs, and nothing else.

Add margin on top, as a share of the final price rather than a mark-up on cost, so that the business has something left over for slow months, for the quotes you lose, and for the tool that fails in February.

Why the number looks big and is not

A 46 pound hourly rate reads as roughly 95,000 pounds a year to a customer doing the wrong arithmetic in their head. The real answer is that you sell about 1,200 hours, not 2,080, and that roughly a quarter of what you charge leaves again as overhead before you have eaten. It is worth being able to say that calmly, because you will be asked.

Day rates, and the trap in them

A day rate is only your hourly rate multiplied by chargeable hours in a day, so 46 pounds becomes about 345 pounds. The trap is that a "day" on a job ten miles further out is not the same day. If travel is inside the day rate, a distant job pays you less per hour than a local one, and nothing on the paperwork says so. Either price travel separately or set a radius beyond which the rate changes.

Review it every year

Insurance, fuel, van finance and materials all moved in the last three years, and a rate set in 2023 is quietly a pay cut now. Redo this sum every January. It takes twenty minutes and it is the highest paid twenty minutes in the year.

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This guide is general information for UK trades, written by the BidReady team. It is not legal, tax or financial advice. Rules change and individual circumstances differ, so take professional advice before acting on anything that matters.