True Hourly Rate Calculator
Find the hourly and day rate that recovers a full year of costs and non-billable time.
Who it is for: UK self-employed tradespeople and small trade contractors.
What you get: Minimum true hourly rate, day rate and the cost of every unbilled hour.
How this calculation works
This tool runs in your browser. No data is sent to our servers. Below are the assumptions used.
- Take-home is grossed up by the tax and NI percentage you enter — it is an estimate, not a tax calculation.
- Billable percentage should reflect reality: quoting, driving, merchant visits and invoicing are not billable.
- The result is a floor. Profit on materials, job risk and market rates sit on top of it.
Hypothetical worked examples
To help you understand the outputs, here are illustrative examples generated using the same logic.
Illustrative example 1: A sole trader working 30 billable hours per week with £18,000 in annual overheads needs to recover £11.54 per hour before any profit is added. If they want a £35,000 target owner pay before personal tax, the true hourly rate rises to around £28–£32 based on the inputs entered.
Illustrative example 2: A small team with a van, premises and two employees requires a higher day rate to cover shared operational costs. The calculator shows the break-even point clearly so the business owner can set a rate that covers all costs before profit is considered.
Questions people ask
- What is a true hourly rate and why is it different from what I charge?
- Your true hourly rate is the minimum you must charge per billable hour to cover every cost of running the business for a year — including your own wages, van, tools, insurance, admin time and tax — divided by the hours you can realistically bill a customer. Most tradespeople charge less than this because they count a 40-hour week as billable, when in reality quoting, driving and admin typically reduce billable time to 55–65% of hours worked.
- What billable percentage should I use?
- For a typical one-van sole trader, Markus's working assumption is 55–65% billable hours. That means roughly 22–26 billable hours in a 40-hour week once quoting, merchant runs, invoicing, travel between jobs and admin are counted. If you work on large contracts with little travel, your billable percentage will be higher. If you do lots of small domestic jobs with significant travel, it will be lower.
- Does the result include profit?
- No. The true hourly rate is a floor: it covers your costs and your target take-home, but it does not include commercial profit for the business. To build profit in, add a margin on top of the rate when pricing jobs, or use the Job Pricing Calculator which separates cost recovery from profit.
- How often should I recalculate my true hourly rate?
- At least once a year, and whenever a significant cost changes — new van finance, a rent increase, a change in insurance or a shift in the type of work you do. A rate set three years ago that has never been tested against current costs is almost certainly too low.
- Should my day rate just be eight times my hourly rate?
- Not necessarily. A day rate should reflect the minimum you need to earn that day to keep the business viable, which includes travel, set-up and clear-up time that is not always billed separately. Use the calculator to check that your day rate covers a realistic number of billable hours, not a theoretical eight.
Where this fits
Paperwork that goes with it
A quote structure that answers the questions customers ask before they say yes: what is included, what is not, when it happens, what it costs and how payment works.
Professional Trade Quote Template