Charge enough to cover what you want to take home, the tax on it, what the business costs to run, and the hours nobody pays you for. A sole trader in England who wants to take home £35,000 a year, with £9,000 of costs and three-quarters of a 46-week year spent on paid work, needs to charge at least £37.60 an hour.
Try it with your own numbers in the hourly rate calculator. The rest of this guide shows how the sum works, so you can check it and explain your price with confidence.
Start from what you want to take home
Pick the amount you want in your pocket for the year, after tax. It's the number that pays the mortgage, the shopping and the holiday, so be honest with yourself. It's easier to start high and see what that means for your rate than to work up from what you think people will pay.
Leave out pension savings and student loan repayments for now, or add them to the take-home figure if you want the rate to cover them too.
Add income tax and National Insurance
As a sole trader you pay income tax and Class 4 National Insurance on your profit, which is what you bill minus your business costs. For the 2026/27 tax year in England, Wales and Northern Ireland:
| Rate | On profit | |
|---|---|---|
| Personal allowance | 0% | up to £12,570 |
| Basic rate | 20% | £12,571 to £50,270 |
| Higher rate | 40% | £50,271 to £125,140 |
| Additional rate | 45% | over £125,140 |
| Class 4 National Insurance | 6% | £12,570 to £50,270 |
| Class 4 National Insurance | 2% | over £50,270 |
The personal allowance gets smaller by £1 for every £2 of income over £100,000. Scotland sets its own income tax bands, so the tax will be a little different there. National Insurance is the same across the UK.
To take home £35,000, you need a profit of about £42,881. Of that, £6,062 goes in income tax and £1,819 in National Insurance.
Add what the business costs to run
Make a list of a year's costs. In the example they come to £9,000:
| Cost | A year |
|---|---|
| Van (lease or loan, or what it loses in value, plus servicing and tyres) | £3,600 |
| Fuel | £2,400 |
| Insurance | £600 |
| Tools and stock you don't charge for | £800 |
| Phone, software and subscriptions | £500 |
| Accountant | £600 |
| Advertising and listings | £500 |
Leave out materials you charge to customers. The job pays for those.
Profit plus costs is what you need to bill in a year: £51,881.
Count the hours someone pays for
There are 52 weeks in a year, but you won't work all of them. Take off your holidays, the bank holidays and a few days for when you're ill. 46 working weeks is a reasonable place to start.
46 weeks of 5 days of 8 hours is 1,840 hours. Not all of them are paid. Driving between jobs, pricing work, buying parts, chasing invoices and answering the phone all take time that nobody pays for. If three-quarters of your hours are paid, that's 1,380 hours you can charge for.
Divide
£51,881 ÷ 1,380 hours = £37.60 an hour, or £300.80 for a full day of 8 hours.
That's the least you should charge to take home what you want. It's not a market price: if you're quicker than most, or people can't get anyone else at short notice, you can charge more.
The hours you can charge matter most
Change the share of paid hours and the rate moves a long way:
| Paid share of your hours | Hours you can charge | Hourly rate | Day rate |
|---|---|---|---|
| 60% | 1,104 | £47 | £376 |
| 75% | 1,380 | £37.60 | £300.80 |
| 90% | 1,656 | £31.33 | £250.64 |
Every hour you spend driving, quoting or doing paperwork has to be paid for by the hours you charge. Grouping jobs by area, answering simple questions with prices on your website, and sending quotes from your phone all raise the share you can charge.
Check it against your area
Look at what local competitors show on their websites and Google listings. If your sum comes out well above theirs, check your costs and hours, and be clear about what your price includes: a guarantee, turning up when you say, a tidy finish. If it comes out well below, you're probably undercharging.
Review your rate at least once a year, and whenever a big cost changes, such as a new van or insurance renewal.
If you're VAT-registered
Add 20% for customers: £37.60 becomes £45.12 an hour. You must register once your turnover for any 12 months goes over £90,000. See Do I need to register for VAT?.
What to do next
- Put your own numbers into the hourly rate calculator.
- Set your call-out charge from it with the call-out charge calculator.
- Show your prices where customers look before they ring. People who've seen a price don't have to ask, and the ones who ring have already accepted it.
Questions
Should I charge by the hour or by the job?
Customers usually prefer a price for the job. Work out the hours it takes, multiply by your hourly rate and add materials: the job quote calculator does the sum. Your hourly rate is still the number underneath.
Does this work for a limited company?
The costs and hours parts do. A limited company pays corporation tax, and directors are taxed differently on salary and dividends, so the tax part won't match. Ask your accountant for the figure you need to bill.
What about Class 2 National Insurance?
Since April 2024 self-employed people don't have to pay Class 2. If your profits are over £7,105, you get the State Pension credit anyway. Below that, you can choose to pay £3.65 a week to protect your State Pension.