Freelancers are probably earning 30% less than they think: here’s how to know what to charge clients

Most freelancers have little idea what they actually earn per hour once hidden costs and unpaid time are factored in. Here’s how to calculate your real rate – and why your “best” clients might be costing you more than just time.

If, as a freelancer, you charge by the hour, you might think you know exactly what you earn per client. After all, you quote £50, £75, or £100 per hour to clients, don’t you? But most freelancers have no idea what they’re actually earning once all the hidden costs and unpaid time are factored in.

Understanding your true hourly rate will help you agree to rates and payment terms that keep you in business. It’s the difference between thinking a project or assignment is profitable and actually being profitable.

Why your quoted rate isn’t your real rate

When you tell a client you charge £75 per hour, are you factoring in the dozens of unbilled activities that eat into your actual earnings? Such as:

Chasing late payments

• Writing proposals that don’t convert
• Endless email chains and Slack channel chats clarifying project requirements
• Administrative tasks like invoicing and bookkeeping
• “Quick calls” that turn into hour-long strategy sessions

According to recent surveys, UK freelancers typically spend 20-30% of their working time on non-billable activities. That means your £75 hourly rate could actually be closer to £50 once everything’s accounted for.

Step 1: Act like a partner in a law firm: track every minute you spend on each client

The first step to calculating your true hourly rate is brutally honest time tracking. For at least a month, record everything related to each client. It will be an eye-opening experience:

Billable time

• The actual work you invoice for
• Meetings and calls are included in your project fee
• Any revisions within your agreed scope

Non-billable time

• Administrative tasks: Creating invoices, updating your CRM, and filing receipts
• Communication: Emails, Slack messages, “quick questions” via WhatsApp
• Business development: Writing proposals, initial consultations, pitch presentations
• Project management: Planning, research, organising files
• Chasing payments: Following up on overdue invoices (sadly common in the UK market)
• Travel time: Getting to client meetings or co-working sessions

Tools for time tracking

Popular options among UK freelancers include:

• Toggl: Simple and effective for basic time tracking
• Clockify: Free option with good reporting features
• Harvest: Integrates well with invoicing
• RescueTime: Automatically tracks computer usage

Step 2: Calculate your total client-specific costs

Your true hourly rate isn’t just about time – it’s about profit after expenses. For each client, subtract:

Direct expenses

• Software subscriptions used specifically for their projects
• Travel costs (fuel, train tickets, parking)
• Outsourced work (subcontractors, freelance assistance)

Materials and supplies

• Professional development directly related to their needs
• Hidden costs
• Payment processing fees: PayPal, Stripe, or bank charges
• Late payment impact: If a client consistently pays 60 days late instead of 30, factor in the cash flow cost
• Currency conversion fees: For international clients paying in foreign currency

Example calculation

Let’s say you earned £3,000 from a client but spent:

• £150 on Adobe Creative Suite (used primarily for their work)
• £80 on travel to their office
• £45 in PayPal fees
• £200 outsourcing some development work

Your net earnings: £3,000 – £475 = £2,525

Step 3: True hourly rate formula

Now for the moment of truth:

True Hourly Rate = Net Client Revenue ÷ Total Hours Invested

Example

Jessica, a freelance marketing consultant from London, thought she was earning £80 per hour from her biggest client. Here’s what her tracking revealed:

• Quoted hourly rate: £80
• Total client payments: £4,800 (60 billable hours)
• Client-specific expenses: £300

Net revenue: £4,500

• Total time tracked: 75 hours (including admin, emails, and unpaid consultations)
• True hourly rate: £4,500 ÷ 75 hours = £60 per hour

She discovered she was actually earning 25% less than she thought – a common revelation for UK freelancers.

What your true rate reveals

Once you’ve calculated your true hourly rates across different clients, you’ll likely discover some surprises:

The “dream client” reality check

That client paying £100 per hour might actually be your least profitable if they:

• Require constant communication
• Change project scope frequently
• Pay invoices 60+ days late
• Demand multiple rounds of revisions

The unexpected winner

Meanwhile, your £60 per hour client might be your most profitable if they:

• Provide clear briefs upfront
• Respond quickly to questions
• Pay within 14 days
• Rarely request changes

How to use this information

Armed with your true hourly rates, you can make smarter business decisions:

1. Client portfolio management (sounds fancy, but it really isn’t)

• Focus your marketing efforts on attracting clients similar to your most profitable ones
• Consider whether to continue working with clients who drag down your average rate
• Use the data to negotiate better terms with existing clients

2. Pricing strategy

• If your true rates are consistently lower than expected, increase your quoted rates
• Build admin time into your project estimates
• Consider charging rush fees for clients who create extra work through poor planning (have these in your contract/on your website if you publish your project rates)

3. Process improvements

• Identify which non-billable activities consume the most time
• Streamline your administrative processes
• Set boundaries around “quick questions” and scope creep
• Making the numbers work better

Here are some strategies freelancers can use to improve their true hourly rates:

Reduce non-billable time

• Use project templates to speed up proposals
• Set specific times for checking and responding to emails
• Charge reasonable consultation fees for initial meetings
• Include a certain number of revisions in your quote, then charge for extras

Improve cash flow

• Ask for deposits upfront (25-50% is standard in the UK)
• Set shorter payment terms (14 days instead of 30)
• Use invoicing software that sends automatic reminders
• Consider factoring services for large invoices
• Streamline operations
• Batch similar tasks together
• Use templates for common communications
• Automate invoicing and expense tracking
• Set boundaries around working hours and response times

The bottom line

Calculating your true hourly rate isn’t about becoming obsessed with every minute – it’s about making informed decisions. The goal isn’t perfection, but awareness. Many successful freelancers find that their most profitable clients aren’t necessarily those paying the highest rates, but those who respect their time and work efficiently.

Regular rate calculations (quarterly works well) help you spot trends, identify your best clients, and make decisions about where to focus your efforts. Make sure you know what it’s really worth.

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