Freelance Accountant Monthly Rate Formula
Learn how to calculate the monthly revenue, day rate and hourly rate needed to support a freelance accountant income target.
This calculation starts with the personal income you want to receive and your regular business costs, then adjusts for the share of revenue you plan to reserve. Dividing the resulting revenue target by realistic billable days and hours produces working day-rate and hourly-rate estimates.
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Required Monthly Revenue
Where:
Add the income you want to receive to your business costs. Then divide that total by the portion of revenue remaining after your planned tax and savings set-aside.
Variables Explained
| Variable | What It Means | Unit |
|---|---|---|
| targetMonthlyIncome - Target monthly personal income | The monthly amount you want available for personal income after business costs and planned set-asides. | currency |
| monthlyBusinessCosts - Monthly business costs | Regular operating costs such as software, insurance, memberships, equipment and marketing. | currency |
| taxAndSavingsRate - Tax and savings set-aside | The percentage of invoiced revenue you plan to reserve for tax, pension, savings or contingencies. | percent |
| retainedRevenueRate - Revenue retained after set-asides | The proportion of invoiced revenue left after the selected set-aside percentage. | percent |
| billableDaysPerMonth - Billable days per month | The number of days you realistically expect to invoice clients during a month. | days |
| billableHoursPerDay - Billable hours per day | The average chargeable hours you expect to deliver on each billable day. | hours |
| monthlyBillableHours - Monthly billable hours | The total number of hours expected to be invoiced in the month. | hours |
Step-by-Step Calculation
Calculate the retained revenue rate
Convert the planned set-aside percentage into the share of revenue available for income and business costs.
retainedRevenueRate = 1 - taxAndSavingsRate / 100
Add income and regular costs
This is the amount required before allowing for tax, savings and other planned reserves.
monthlyFundsNeeded = targetMonthlyIncome + monthlyBusinessCosts
Calculate required monthly revenue
Increase the funds needed so that the retained portion can cover both the income target and business costs.
monthlyRevenueTarget = monthlyFundsNeeded / retainedRevenueRate
Calculate monthly billable hours
Multiply expected billable days by expected billable hours per day.
monthlyBillableHours = billableDaysPerMonth * billableHoursPerDay
Calculate the required day rate
Divide the monthly revenue target by the number of billable days.
dailyFreelanceRate = monthlyRevenueTarget / billableDaysPerMonth
Calculate the required hourly rate
Divide the monthly revenue target by total expected billable hours.
hourlyFreelanceRate = monthlyRevenueTarget / monthlyBillableHours
Example: Freelance accountant rate for a monthly income goal
Revenue retained after set-asides
1 - 25 / 100
0.75 or 75%
Monthly funds needed
£4,000 + £600
£4,600
Required monthly revenue
£4,600 / 0.75
£6,133.33
Monthly billable hours
16 × 7
112 hours
Required day rate
£6,133.33 / 16
£383.33 per day
Required hourly rate
£6,133.33 / 112
£54.76 per hour
Final Result
To support this example, aim to invoice about £6,133 per month, or roughly £383 per billable day and £54.76 per billable hour.
Assumptions
- ✓Your income target is the amount you want available after regular business costs and your selected set-aside.
- ✓The tax and savings percentage is a personal planning provision, not a calculation of an actual tax bill.
- ✓All planned billable days and hours are invoiced and paid in the same month.
- ✓Regular business costs are represented by one monthly amount.
- ✓The same rate is used across all billable work for the purpose of the estimate.
Limitations
- !Actual tax, pension contributions and savings needs depend on personal circumstances and location.
- !Late payments, unpaid invoices and bad debts can reduce cash received during the month.
- !One-off costs, financing costs, VAT or sales taxes are not included unless you build them into an input.
- !A single average rate may not reflect different services, clients, project scopes or pricing models.
- !The calculation does not account for annual fluctuations in workload, leave or seasonal demand.
Common Mistakes to Avoid
Using total working days rather than days that can genuinely be billed to clients.
Treating a tax and savings provision as an exact estimate of tax due.
Forgetting recurring costs such as indemnity insurance, software subscriptions and professional memberships.
Setting billable hours equal to all hours worked, without allowing for administration and business development.
Comparing the calculated freelance hourly rate directly with an employee hourly wage without allowing for unpaid leave and overheads.
Related Formulas
Frequently Asked Questions
How do I calculate a freelance accountant monthly revenue target?
Add your target personal income to regular monthly business costs, then divide by the share of revenue remaining after your selected tax and savings set-aside.
How is a freelance accountant day rate calculated?
Divide the required monthly revenue by the number of billable days you expect to invoice in that month.
How do I turn a monthly freelance income target into an hourly rate?
First calculate required monthly revenue, then divide it by billable days multiplied by billable hours per day.
Why does the formula divide by the retained revenue rate?
The division increases the invoice target so the amount left after the planned set-aside is sufficient to cover your income target and business costs.
What happens if I increase my tax and savings set-aside percentage?
The retained share of each invoiced amount becomes smaller, so the required monthly revenue, day rate and hourly rate increase.
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