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What does your hourly rate pay over a year?
An hourly rate is not an income. This calculator multiplies your rate by the hours you can actually bill, subtracts annual business expenses and applies a flat tax rate, so you can see gross, net and the hourly figure that survives the year.
Flat-rate approximation. Excludes VAT or GST, pension, benefits, real tax brackets, deductions, credits and local taxes. Compare scenarios, not a tax return.
Billable hours are the real input
A 40-hour week rarely contains 40 billable hours. Admin, sales, invoicing and holidays are unpaid, so many freelancers bill between 20 and 30 hours in a working week. Enter the number you can defend from last year's invoices, not the number you would like to work.
The calculator multiplies rate, billable hours and working weeks to get gross income. Change weeks per year to model unpaid holiday, sick leave or a slow season. The gross figure is revenue before expenses and tax, not money in your account. When you change the rate, the whole chain moves with it, which makes the tool useful for testing a raise.
Expenses, tax and the effective hourly
Annual expenses are subtracted first, then a flat tax rate is applied to the remainder. Tax is floored at zero, so a loss year does not produce a negative tax bill. Dividing the after-tax result by billable hours gives the effective hourly figure, which is the number to compare with a salaried role or a direct client offer.
The monthly take-home figure spreads that annual result across twelve months. It does not smooth uneven cash flow, and it assumes you set tax aside as you earn rather than paying it in one lump later.
Where this model is too simple
Real tax is progressive, with brackets, allowances, deductions and credits that a single flat rate cannot reproduce. Expenses may be only partly deductible, and pension contributions, student loans and local taxes are all outside the model. VAT or GST is excluded too: if you are registered, it is collected for the state and is not income.
Use the output to sanity-check a rate, compare scenarios and plan a tax reserve. It also assumes every invoiced hour is paid; bad debt and late payment are not modelled. For an actual liability, apply your jurisdiction's rules or ask a qualified accountant.
Frequently asked questions
What counts as billable hours?
Hours you can invoice to a client. Sales calls, admin, learning and unpaid revisions are not billable unless a contract says otherwise. Pull the number from your time tracker or from last year's invoices.
Why subtract expenses before tax?
Business expenses usually reduce taxable profit, so subtracting them first is closer to how a tax return works. The model then applies one flat rate to the remaining profit instead of real brackets.
Does it include VAT or GST?
No. Registered businesses collect VAT or GST on top of their fee and remit it, so it is not income. Enter rates excluding VAT and keep collected tax out of the annual figures.
Can I compare this with a salary?
Yes, for comparison only. Add the value of paid holiday, pension contributions and benefits your rate must fund, then compare that total with the full cost of a salaried package, not just the headline salary.