calculate hourly rate self employed trades
How to Calculate Your Hourly Rate as a New Tradie
Most new tradies pluck an hourly rate out of thin air. They hear the lad down the road charges £30 an hour, so they charge £30 an hour, then wonder why there's nothing left at the end of the month. Here's the thing nobody tells you when you go self-employed: your hourly rate has to cover your wages, your overheads, your unpaid hours, and your holidays, all from the time you actually spend on the tools. Get that wrong and you're working hard to lose money politely.
Let's fix it properly, with a number you can defend.
Why 'what the other lad charges' is a trap
You don't know his overheads, his van costs, his tax position, or whether he's quietly going under. Copying his rate is copying his mistakes. Your rate has to come from your numbers.
The hours that aren't billable
This is the bit that catches everyone. You do not bill 40 hours a week. You bill the hours you're on a job, and you quote, drive, buy materials, chase invoices and do paperwork for free. Realistically a one-man band bills 25 to 30 hours of a 40-hour week. Price as if all 40 are billable and you'll come up short every time.
The costs you forget
- Van: fuel, insurance, tax, servicing, finance
- Tools, replacements and calibration
- Public liability insurance and scheme membership
- Phone, software, accountant, advertising
- Holiday, sick days and bank holidays (nobody pays these for you)
The hourly rate formula
Here's the one to write on the wall. Work it out once a year and whenever your costs jump.
Worked example for a one-man band who wants to take home £40,000:
- Target annual income (your wage): £40,000
- Annual overheads (van, insurance, tools, software, etc.): £14,000
- Billable hours: 27 hours/week × 46 working weeks = 1,242 hours
- (£40,000 + £14,000) ÷ 1,242 = £43.48/hour, call it £45
Where new tradies get this wrong
These three errors quietly bleed you dry.
- Billing 40 hours instead of 27. You divide by the wrong number and your rate comes out far too low. Use realistic billable hours or you're subsidising every customer.
- Leaving overheads out entirely. Tax, insurance and van costs don't vanish because you ignored them. If the rate doesn't cover them, they come straight out of your wage.
- Forgetting holiday and sick pay. Employed mates get paid time off. You don't, unless you build it into the rate. Price your weeks off in, or you never get one.
Let the maths run itself
Working this out on the back of a fag packet once is fine. Doing it on every job is a chore, which is why most lads skip it and guess. Quotato has built-in profit-margin calculators that take your rate, your hours and your material costs and show you the real picture per job, before you send the quote.
You set your numbers once, then every quote tells you whether it's actually worth doing. No more finding out at year-end that the busy jobs were the loss-makers. You see it up front, while you can still do something about it.
Know your number. Charge it without flinching. That's how a trade business survives.
Plug in your costs and price every job to actually profit.
Try Quotato free →