The Freelancer's Guide to Setting Your Rates
Undercharging is the number one mistake new freelancers make. Here's how to price yourself confidently.
By S. Mitchell
Pricing is where most new freelancers leave serious money on the table — not because they do bad work, but because they price from fear rather than strategy. Too low and you burn out resenting your clients. Too high without confidence and you lose projects before they start. There is a better way.
In this article
Why this matters
Your rate is not just a number — it is a signal. A rate that is too low signals inexperience and invites difficult clients. A confident, well-researched rate signals professionalism and attracts better projects. Getting this right changes everything.
The Baseline Formula
Before you research the market, you need to know your floor — the minimum you can charge and still make this work financially.
Start with your target annual income
Write down the actual annual income you need — covering rent, food, tax, savings, equipment, and software. Be honest, not optimistic.
Account for non-billable time
You will not bill 40 hours per week. Admin, marketing, and pitching eat roughly half your time. Assume 20 billable hours per week as your realistic baseline.
Do the maths
Target annual income divided by 48 working weeks divided by 20 billable hours = your minimum hourly rate. Add 30% for tax and expenses on top. That is your floor. Never go below it.
Example: £40,000 target divided by 48 divided by 20 = £41.67/hr before tax. Add 30% = £54/hr minimum. If someone offers you less, you say no — or you say yes knowing it is a deliberate short-term decision.
Research Your Market
Once you know your floor, research where the ceiling is. Spend two hours doing this:
- Browse Upwork and Fiverr for your service category. Note the full range, not just the low end.
- Look at LinkedIn profiles of freelancers at different experience levels in your niche.
- Join 2–3 freelance communities on Reddit or Slack and ask directly what people charge. Freelancers are often more open about this than you expect.
- Check industry salary surveys and reverse-engineer a day rate from annual figures.
Do not race to the bottom. The market has a top end too — and every client paying premium rates is proof that someone is willing to pay it. That someone can be you.
Move to Value-Based Pricing
Hourly pricing penalises you for getting better. The faster and more skilled you become, the less you earn per project. Value-based pricing flips this entirely.
Value-based pricing means charging based on the outcome your work delivers, not the time it takes. If a landing page you write converts 3% better and generates £50,000 in additional annual revenue, your fee is a fraction of that value — not a count of the hours you spent writing.
- Understand the business impact of your work — ask clients what a successful outcome is worth to them
- Package your services into deliverables, not hours
- Anchor your price to the client's gain, not your cost
- Be specific: "This brand refresh will position you to raise your prices by 20–30%" beats "30 hours of design work"
How to Raise Your Rates
Most freelancers undercharge for too long because raising rates feels confrontational. It is not — it is normal business practice, and your clients expect it.
Give existing clients 60 days notice
A brief professional email: "From [date] my rates will be [new rate]. I wanted to give you plenty of notice." No apology, no lengthy justification.
Apply new rates immediately to new clients
There is no reason to offer new clients the old rate. Every new engagement is a chance to move up.
Review every 6 months
Set a calendar reminder. Ask: am I still below market? Have my skills, portfolio, and results improved? The answer will almost always justify an increase.
The Pricing Mindset Shift
The hardest part of pricing is not the maths — it is believing you are worth it before the evidence is overwhelming. That belief has to come first, and it is built by charging properly, doing great work, and watching clients pay without complaint.
Every time you undercharge, you are not just losing money today. You are training yourself — and your clients — that your work is not worth much. Charge what the work is worth. Deliver what the rate deserves. That is the cycle that builds a real business.
APPLY THIS THIS WEEK
- Calculate your baseline hourly rate using the formula above. Write the number down somewhere visible.
- Spend 90 minutes researching what others charge in your niche. Find 3 data points above your current rate.
- If clients are paying below your new floor, draft the rate-raise email now. Schedule it to send in 3 days.
- For your next new client enquiry, quote 20% higher than you usually would. Notice what happens.